[Federal Register Volume 71, Number 187 (Wednesday, September 27, 2006)]
[Rules and Regulations]
[Pages 56658-56705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-8035]



[[Page 56657]]

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Part III





Department of Commerce





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Economic Development Administration



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13 CFR Chapter III



Economic Development Administration Reauthorization Act of 2004 
Implementation; Regulatory Revision; Final Rule

Federal Register / Vol. 71, No. 187 / Wednesday, September 27, 2006 / 
Rules and Regulations

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DEPARTMENT OF COMMERCE

Economic Development Administration

13 CFR Chapter III

[Docket No.: 05072910-6229-06]
RIN: 0610-AA63


Economic Development Administration Reauthorization Act of 2004 
Implementation; Regulatory Revision

AGENCY: Economic Development Administration, Department of Commerce.

ACTION: Final rule.

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SUMMARY: On August 11, 2005, the Economic Development Administration 
(``EDA'') published an interim final rule to reflect the amendments 
made to EDA's authorizing statute, the Public Works and Economic 
Development Act of 1965, by the Economic Development Administration 
Reauthorization Act of 2004. A ninety-three (93) day public comment 
period followed the publication of the interim final rule, specifically 
from August 11, 2005 through November 14, 2005. On December 15, 2005, 
EDA published an interim final rule that amended certain provisions of 
the August 11, 2005 interim final rule. EDA received a large number of 
public comments on different portions of the August 11, 2005 interim 
final rule. This final rule responds to all substantive comments 
received during the public comment period and finalizes this rulemaking 
proceeding based on comments received during the public comment period.

DATES: This rule is effective as of September 27, 2006.

FOR FURTHER INFORMATION CONTACT: Hina Shaikh, Esq., Attorney Advisor, 
Office of Chief Counsel, Economic Development Administration, 
Department of Commerce, Room 7005, 1401 Constitution Avenue, NW., 
Washington DC 20230; telephone: (202) 482-4687.

SUPPLEMENTARY INFORMATION:

Background

    EDA published an interim final rule in the Federal Register (70 FR 
47002) on August 11, 2005 (the ``Interim Final Rule''). The Interim 
Final Rule reflects the amendments made to EDA's authorizing statute, 
the Public Works and Economic Development Act of 1965 (42 U.S.C. 3121 
et seq.) (``PWEDA''), by the Economic Development Administration 
Reauthorization Act of 2004 (Pub. L. 108-373, 118 Stat. 1756 (2004)) 
(the ``2004 Act''). In addition, the Interim Final Rule reflects EDA's 
current practices and policies in administering its economic 
development programs that have evolved since the promulgation of EDA's 
former regulations. The Interim Final Rule provided for a public 
comment period from August 11, 2005 through October 11, 2005. EDA also 
held a public hearing on September 1, 2005 on the Interim Final Rule.
    On September 30, 2005, EDA published a final rule (70 FR 57124) 
that extended the deadline for submitting public comments on the 
Interim Final Rule from October 11, 2005 until November 14, 2005. The 
September 30, 2005 final rule also delayed the effective date, from 
October 1, 2005 until November 14, 2005, of (i) Sec.  304.2(c)(2) of 
the Interim Final Rule, pertaining to membership requirements of a 
District Organization's governing body; and (ii) Sec.  301.4 of the 
Interim Final Rule, as the provisions of this section pertain to 
Investment Rates for EDA Planning Investments. On November 14, 2005, 
EDA published another final rule (70 FR 69053) delaying the effective 
date of these provisions from November 14, 2005 until January 31, 2006. 
All other provisions of the Interim Final Rule became effective on 
October 1, 2005.
    The conference report (H.R. Rep. No. 109-272, at 136-138 (2006) 
(Conf. Rep.); the ``Conference Report'') accompanying the FY 2006 
Science, State, Justice, Commerce and Related Agencies Appropriations 
Act (Pub. L. 109-108, 119 Stat. 2290 (2005)) (the ``2006 Appropriations 
Act'') expressed Congressional intent as to specific provisions of the 
Interim Final Rule. On December 15, 2005, EDA published an interim 
final rule (70 FR 74193) to immediately effect only those changes to 
the Interim Final Rule specified in the Conference Report (the 
``December 15, 2005 Rulemaking'').
    After receiving extensive input from stakeholders, EDA is 
publishing this final rule to respond to all comments received during 
the public comment period on all aspects of the Interim Final Rule, and 
to make additional revisions. The majority of public comments were part 
of a mass mailing campaign, which resulted in EDA receiving hundreds of 
identical or nearly identical pieces of mail in a calendar month. For 
the most part, these comments expressed opinions on 13 CFR parts 300, 
301, 302, 303, 304 and 307. This final rule also explains changes made 
to the Interim Final Rule in response to the Congressional 
recommendations set forth in the Conference Report and effected by the 
December 15, 2005 Rulemaking. Capitalized terms used but not otherwise 
defined in this final rule have the meanings ascribed to them in the 
Interim Final Rule (see, e.g., 13 CFR 300.3, 303.2, 307.8, 314.1 and 
315.2). Specifically, this final rule makes the following revisions to 
the Interim Final Rule:

Part 300--General Information

    Part 300 of the regulations specifically states EDA's mission and 
highlights the policies and practices that EDA employs in order to 
attract private capital investments and higher-skill, higher-wage jobs 
to those Regions experiencing substantial and persistent economic 
distress. In drafting the Interim Final Rule, the main revisions 
occurred in Sec.  300.3, in which EDA introduced several new terms and 
revised existing terms. Anticipating that an improved section of 
definitions would assist readers in better understanding EDA's policies 
and requirements, EDA increased the number of defined terms to ensure 
clarity, consistency and technical precision.
    This final rule further revises part 300 of the Interim Final Rule 
by inserting the word ``development'' between the words ``economic'' 
and ``agenda'' in the second sentence in Sec.  300.1, to clarify that 
EDA's mission is to lead sustainable economic development throughout 
the United States.
    EDA received one comment expressing difficulty in understanding the 
difference between the definitions of ``District Organization'' and 
``Economic Development District.'' EDA believes that both terms are 
explained clearly in the Interim Final Rule and, therefore, this final 
rule does not amend these terms. A District Organization is any 
organization that meets the requirements of Sec.  304.2. The definition 
of Economic Development District conveys that EDA may (at the request 
of a District Organization) designate a geographic area, or a 
``Region,'' as an Economic Development District if the Region satisfies 
the requirements of Sec.  304.1. This final rule adds a minor 
clarifying point to the definition of Economic Development District to 
make clear that Districts designated prior to the effective date of the 
Interim Final Rule would have been designated pursuant to a previous 
version of this regulation at 13 CFR part 302.
    We received five comments that stated the following: ``Part 300 
eliminates the EDD designation and replaces it with `District 
Organization' and specifically adds reference to `community or faith-
based non-profit organization.' With numerous unfunded and under-funded 
EDDs around the nation[,] expanding the number of new

[[Page 56659]]

eligible recipients is not prudent use of already limited funding.'' 
The Interim Final Rule replaced the reference to an Economic 
Development District in the definition of ``Eligible Recipient'' with 
the term ``District Organization'' because a District Organization may 
apply for and receive EDA Investment Assistance. In contrast, an 
Economic Development District is a geographic description and cannot 
apply for EDA Investment Assistance until it establishes a structure to 
give voice to the interests in that Region. EDA has included faith-
based organizations in its investment portfolio since approximately 
1969; therefore, the Interim Final Rule did not expand the number of 
new Eligible Recipients. Rather, the Interim Final Rule demonstrates 
EDA's commitment to making its programs fully available to community 
and faith-based organizations by specifically identifying these non-
profit organizations as Eligible Recipients. For these reasons, this 
final rule does not amend the definition of Eligible Recipient.
    This final rule replaces the lead-in statement for the defined term 
Eligible Recipient to ``Eligible Recipient means any of the 
following:'', and clarifies that a consortium of Indian Tribes is 
qualified to be an Eligible Recipient, similar to consortia of 
political subdivisions and institutions of higher education. EDA did 
not intend to exclude a consortium of Indian Tribes from the definition 
of Eligible Recipient; this language was inadvertently dropped from the 
text of the Interim Final Rule. Additionally, the definition of ``In-
Kind Contributions'' is revised by replacing the phrase ``Uniform 
Administrative Requirements of 15 CFR parts 14 and 24 (as applicable)'' 
with the phrase ``requirements of 15 CFR parts 14 or 24, as 
applicable.'' This final rule also expands the definition of ``Indian 
Tribe'' to include a non-profit Indian corporation, Indian authority 
and other non-profit Indian tribal organization or entity, provided 
that the tribal organization or entity is wholly owned by, and 
established for the benefit of, the Indian tribe. This language was 
inadvertently dropped in the Interim Final Rule. EDA makes expressly 
clear that these types of organizations are included in the definition 
of Indian Tribe, consistent with the definition of Indian Tribe in 
EDA's former regulations.
    EDA received no public comments on the defined term ``Private 
Sector Representative'' in the Interim Final Rule. However, the 
Conference Report accompanying the 2006 Appropriations Act included a 
specific direction by Congress for EDA to expand the definition of 
Private Sector Representative. Accordingly, the December 15, 2005 
Rulemaking expanded the definition to include a designee of any senior 
management official or executive holding a key decision-making position 
in any for-profit enterprise.
    EDA received one question regarding ``whether the other Federal 
grant programs will allow EDA funds to match their programs.'' Section 
205 of PWEDA (42 U.S.C. 3145) and Sec.  301.6 of the Interim Final Rule 
authorize EDA to supplement a grant awarded in another designated 
Federal grant program up to the amount of the maximum allowable EDA 
investment rate, even if the other Federal grant program has a lower 
grant rate. An applicant should contact the Federal Agency making the 
grant award to determine if its governing statute conflicts with PWEDA.
    EDA received approximately 84 identical comments stating, ``While 
we appreciate the theory and practice of forging local partnerships 
based on shared economic interests of a `region,' the creation of 
competing regional boundaries and definitions is confusing and 
misleading.'' This final rule does not amend the definition of Region 
or the term ``Regional'' because it sufficiently explains that self-
sustained economic development should occur across communities and 
political boundaries. EDA believes that Regional partnerships, with 
human, natural, technological and capital components, are essential to 
the economic competitiveness of a Region.
    EDA received one comment on the definition of ``Special Need'' in 
Sec.  300.3. The commenter noticed a discrepancy between the phrase 
``closure or restructuring of industrial firms'' in the definition of 
Special Need and the phrase ``loss of a major community employer'' in 
the list of circumstances set forth in Sec.  307.1. In response to this 
comment, this final rule adds to the definition of Special Need the 
circumstance of a Region losing a major employer.

Part 301--Eligibility, Investment Rate and Proposal and Application 
Requirements

    Part 301 of the regulations sets forth eligibility, maximum 
allowable Investment Rate levels, and proposal and application 
requirements common to all PWEDA-enumerated programs (excluding Trade 
Adjustment Assistance for Firms at part 315). Part 301 presents these 
requirements in a more logical sequence than EDA's former regulations 
and provides the user with a helpful roadmap to navigate through these 
threshold issues.
    In general, subpart A presents an overview of eligibility 
requirements, subpart B addresses applicant eligibility, subpart C 
addresses Regional economic distress level requirements, subpart D sets 
forth the maximum allowable Investment Rates and corresponding Matching 
Share requirements for various Projects, and subpart E addresses the 
proposal and application requirements, as well as the evaluation 
criteria used by EDA in selecting Projects.
    The economic distress criteria referenced in Sec.  301.3(a) for 
Projects under parts 305 and 307 track sections 301 and 405 of PWEDA 
(42 U.S.C. 3161 and 3175). EDA received one comment stating that, 
``Requiring the per capita income to be eighty (80) percent or less of 
the national average [per capita income] will result in ineligibility 
of distressed areas located in higher income areas such as the 
northeast United States.'' This final rule does not amend Sec.  
301.3(a)(1)(ii) because it reflects the statutory provision set forth 
in section 301(a)(1) of PWEDA (42 U.S.C. 3161), which provides that for 
a Project to be eligible for a Public Works or Economic Adjustment 
Assistance Investment, the Project must be located in a Region that 
meets one or more of the following economic distress criteria: (i) Per 
capita income of 80 percent or less of the national average; (ii) an 
unemployment rate that is at least one percent greater than the 
national average; or (iii) a Special Need, as determined by EDA.
    EDA received approximately 100 identical or nearly identical 
comments on Sec.  301.3(a)(4)(i), which provides that EDA will 
determine economic distress levels according to unemployment rates or 
per capita income levels based upon the most recent American Community 
Survey (``ACS'') published by the U.S. Census Bureau for (i) the 
applicable Region where the Project will be located (for Projects 
seeking to qualify under Sec.  301.3(a)(1)), (ii) the geographic area 
where substantial direct Project benefits will occur (for Projects 
seeking to qualify under Sec.  301.3(a)(2)), or (iii) the geographic 
area of poverty or unemployment (for Projects seeking to qualify under 
Sec.  301.3(a)(3)). These comments stated, ``While we support the 
concept of the ACS tool, the vast majority of the nation's small 
metropolitan and rural communities are years away from having access to 
ACS data.''
    While EDA understands that the ACS is still not available for some 
geographies (e.g., census tracts,

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townships, or certain cities and counties), EDA believes that the ACS 
is the most accurate and reliable metric currently available to measure 
the economic distress of a Region (or other geographic area). Where a 
recent ACS is not yet available, or will not be available, the 
regulation makes clear that EDA will use the most recent Federal data 
from other sources, including data available from the Census Bureau and 
the Bureaus of Economic Analysis, Labor Statistics, Indian Affairs or 
any other Federal source determined by EDA to be appropriate. For 
improved clarity and understanding, this final rule amends the last 
sentence in Sec.  301.3(a)(4)(i) by rephrasing ``the most recent data 
available through the government of the State in which the Region is 
located'' as ``the most recent data available from the State.''
    For economic distress based upon a Special Need, EDA will conduct 
an independent analysis of the facts and circumstances in a given case. 
See Sec.  301.3(a)(4)(ii).
    Section 301.4 reflects the new Investment Rate determination 
structure in section 204 of PWEDA (42 U.S.C. 3144; see also sections 
205 and 206 of PWEDA (42 U.S.C. 3145 and 3146)). Generally, as stated 
in section 204(a) of PWEDA and in Sec.  301.4(b)(1), the maximum 
Investment Rate for a Project must not exceed the sum of fifty (50) 
percent, plus an additional thirty (30) percent, based on the 
``relative needs'' of the Region where the Project is located.
    EDA received approximately 812 identical or nearly identical 
comments on the Investment Rate provisions for all EDA programs. The 
majority of these comments stated: ``We are very concerned about 
changes to EDA matching rates for all agency investments, including 
planning grants, public works investments and economic adjustment 
assistance. We fear the increased costs to our local communities for 
both EDA planning grants and infrastructure projects will put our 
future economic progress in jeopardy.'' We received approximately 153 
comments that opposed the change in EDA Investment Rates for Planning 
grants only. These comments stated that the ``new range from a minimum 
of 30% Federal to 70% local to a maximum of 80% Federal and 20% local'' 
is likely to put a greater financial burden on rural local governments. 
The December 15, 2005 Rulemaking addressed these two sets of comments, 
as described in detail below.
    In the Interim Final Rule, EDA provided maximum allowable 
Investment Rate categories of 30% and 40% for those Regions eligible 
for Investment Assistance under PWEDA, but which are experiencing lower 
levels of economic distress. The Conference Report accompanying the 
2006 Appropriations Act directed EDA to revise this regulation. 
Accordingly, the December 15, 2005 Rulemaking provided that Projects 
located in Regions demonstrating (i) a 24-month unemployment rate at 
least 1% greater than the national average or (ii) per capita income 
not more than 80% of the national average will be eligible to receive a 
maximum allowable Investment Rate of 50%. This revision eliminated the 
30% and 40% maximum allowable Investment Rate categories. The higher 
threshold levels of economic distress for the 60%, 70% and 80% maximum 
allowable Investment Rate categories remain the same as provided in the 
Interim Final Rule.
    The December 15, 2005 Rulemaking also revised Sec.  301.4(b) to the 
extent that it applies to Planning Investments, by placing a subsection 
titled Projects under part 303 at Sec.  301.4(b)(3), which includes the 
following provisions for determining the Investment Rates for Planning 
Investments: (i) All Planning Investments will receive a minimum 
Investment Rate of 50%; (ii) except as otherwise provided in section 
204(c) of PWEDA (42 U.S.C. 3144) and Sec.  301.4(b)(5), the maximum 
allowable Investment Rate for Planning Investments will be the maximum 
allowable Investment Rate set forth in Table 1 of Sec.  301.4 for the 
most economically distressed county or other equivalent political unit 
(e.g., parish) within the Region; (iii) the maximum allowable 
Investment Rate will not exceed 80%; and (iv) in compelling 
circumstances, the Assistant Secretary may waive the requirement in 
paragraph (ii) above. The Assistant Secretary cannot delegate the 
authority to grant this waiver.
    This final rule revises Sec.  301.4(b)(2) by replacing the phrase 
``paragraphs (b)(3) and (4)'' with ``paragraph (b)(5).'' References to 
paragraphs (b)(3) and (b)(4) were inapplicable in the Interim Final 
Rule, as Special Need Projects concern Investments under parts 305 and 
307 only. Such Projects are, however, eligible for a maximum allowable 
Investment Rate of one hundred (100) percent under Sec.  301.4(b)(5). 
For subject-verb agreement, this final rule also revises Table 2 of 
Sec.  301.4 by amending the phrase ``Projects of non-profit 
organizations that the Assistant Secretary determines has exhausted its 
effective borrowing capacity'' to ``Projects of non-profit 
organizations that the Assistant Secretary determines have exhausted 
their effective borrowing capacity.''
    Additionally, this final rule revises Sec.  301.7 by replacing the 
phrase ``an EDA Pre-application for Federal Assistance'' with the 
phrase ``a Pre-application for Investment Assistance.'' This amendment 
corresponds to a similar change EDA made to the title of its pre-
application (Form ED-900P) after publication of the Interim Final Rule. 
This final rule also designates the paragraph under Sec.  301.7 as (a) 
and re-designates provisions (a), (b) and (c) as (1), (2) and (3), in 
order to add a second paragraph (b) which states that for certain 
programs, EDA may instruct an Eligible Applicant to submit an 
application for Investment Assistance in lieu of the pre-application 
for Investment Assistance. EDA adds this provision to ensure clarity 
regarding EDA's proposal and application requirements.
    To clarify the distinction between proposal evaluation criteria and 
proposal selection criteria, this final rule deletes the third sentence 
in Sec.  301.8 in its entirety, and replaces the phrase ``the 
applicable FFO'' in Sec.  301.9(a)(3) with ``the funding priority 
considerations identified in the applicable FFO.'' In the lead-in 
statement to paragraphs (a) through (e) of Sec.  301.8, we also replace 
the word ``may'' with ``will,'' to have consonant wording with relevant 
FFOs. This final rule also adds the word ``criteria'' to the title of 
Sec.  301.9.

Part 302--General Terms and Conditions for Investment Assistance

    Part 302 sets forth the general terms and conditions for EDA 
Investment Assistance. The majority of provisions in this part were 
transferred from part 316 of EDA's former regulations. Part 302 applies 
to all Investments under PWEDA and certain provisions, such as Sec.  
302.5, apply to the Trade Adjustment Assistance for Firms program under 
the Trade Act (see part 315). This part covers a variety of EDA 
requirements for Investment Assistance, including environmental reviews 
of Projects, relocation assistance and land acquisition requirements, 
inter-governmental review of Projects, and Recipients' reporting, 
record-keeping, post-approval and civil rights requirements. EDA 
received no public comments on Sec. Sec.  302.1 through 302.15 of the 
Interim Final Rule. For consistency throughout the chapter, this final 
rule amends the last sentence in Sec.  302.1 by replacing the phrase 
``annual FFO'' with ``applicable FFO.'' This final rule makes

[[Page 56661]]

no further revisions to Sec. Sec.  302.1 through 302.15.
    EDA received approximately 109 identical or nearly identical 
comments on Sec.  302.16(b) of the Interim Final Rule, in connection 
with Recipients' reporting requirements. This section implements 
section 212 of PWEDA (42 U.S.C. 3152), which requires recipients to 
submit reports that contain an evaluation of the effectiveness of the 
investment assistance provided under PWEDA. These comments expressed 
concern ``about the new requirement that all performance data and 
information submitted by grantees be from independent sources.'' 
Subsection 302.16(b) provides that data used by Recipients in preparing 
reports must be accurate and verifiable, as determined by EDA, and must 
come from independent sources (whenever possible). While EDA 
appreciates that locating independent sources has time and cost 
implications, we believe it is very important that the data used by a 
Recipient is verified when possible by a reliable source independent of 
the Recipient. The Recipient is the primary source for information on 
the effectiveness of the Investment Assistance provided and fulfillment 
of the objectives of PWEDA, and therefore, reported data must be 
accurate and verifiable as determined by EDA. Whenever possible, the 
Recipient should cross-check these data with an independent secondary 
source to avoid conscious or unconscious biases and errors. For the 
reasons stated above, this final rule does not change Sec.  302.16(b).
    Section 302.17 of the regulations states EDA's conflicts of 
interest policy. In the Interim Final Rule, EDA moved the conflicts of 
interest provisions for revolving loan fund (``RLF'') Grants from Sec.  
308.15(e) of EDA's former regulations to Sec.  302.17(c) to improve 
organization and referencing facility. EDA received approximately 87 
identical or nearly identical comments on Sec.  302.17(c)(3), which 
provides that former board members of a Recipient of an RLF Grant and 
members of his or her Immediate Family cannot receive a loan from the 
RLF for a period of two years from the date that the board member last 
served on the RLF's board of directors. Generally, these comments 
expressed opposition to ``the change in the waiting period from one 
year to two years, along with the elimination of the `exemption clause' 
with [regard to] public disclosure.'' Some comments also expressed 
concern that Sec.  302.17(c)(3) ``place[s] an undue burden on those 
individuals that serve in the local public arena and are now unable to 
participate in the RLF for a proposed two year period.''
    EDA does not intend for Sec.  302.17(c)(3) to burden or penalize 
local community business participants for their membership on a 
District Organization's governing body or on an RLF Recipient's board 
of directors. We increased the one-year period to a two-year period in 
Sec.  302.17(c)(3) to be consistent with section 606 of PWEDA (42 
U.S.C. 3216), which directs an Eligible Applicant to execute a binding 
agreement, for the two-year period beginning on the date on which the 
Investment Assistance is awarded, requiring it to refrain from 
employing, offering any office or employment to, or retaining for 
professional services, certain persons associated with EDA or the 
Department. Because of the importance of section 606 of PWEDA, EDA's 
formal application for Investment Assistance includes a certification 
that must be signed by an authorized official of the Eligible 
Applicant.
    Similarly, Sec.  302.17(c)(3) prohibits the conduct of any business 
(e.g., the issuance of an RLF loan) by a former RLF Recipient board 
member and the RLF Recipient for a two-year period after leaving the 
board member position. As a general matter, if a potential or actual 
conflict arises, a former RLF Recipient board member has a fiduciary 
duty to disclose the conflict. We removed the conflict waiver exception 
found in Sec.  308.15(e) of EDA's former regulations because public 
disclosure of an actual or potential conflict, regardless of whether 
the benefit conferred is substantial or de minimus, can potentially 
damage the credibility of the RLF Recipient's decision-making process. 
The removal of the conflict waiver exception makes EDA's conflicts of 
interest rules for RLFs consistent with its general conflicts of 
interest policy (see Sec.  302.17(a)). For these reasons, this final 
rule does not amend Sec.  302.17(c)(3). EDA received no comments on the 
conflicts of interest provisions for the Trade Adjustment Assistance 
for Firms program, as set forth in Sec.  315.15.
    EDA received no public comments on Sec. Sec.  302.18 through 302.20 
of the Interim Final Rule. These sections of part 302 remain as 
provided in the Interim Final Rule.

Part 303--Planning Investments and Comprehensive Economic Development 
Strategies

    Part 303 was revised in the Interim Final Rule to emphasize that 
results-driven implementation, not just the writing of a 
``Comprehensive Economic Development Strategy'' (or ``CEDS''), is vital 
to successful performance under EDA's Planning program. The CEDS is a 
crucial part of EDA's program portfolio and is required to be in place 
before a Recipient may receive a Public Works Investment or Economic 
Adjustment Assistance under parts 305 or 307. Part 303 discusses the 
application and award requirements for Planning Investments and the 
requirements for CEDS, State plans and short-term Planning Investments.
    To ensure clarity, this final rule revises the first sentence in 
Sec.  303.1 by amending the phrase ``related to short-term Planning 
Investments and State plans'' to ``and for related short-term Planning 
Investments and State plans.'' For consistency with the definition of 
Eligible Recipient in Sec.  300.3, this final rule also amends the 
second sentence in Sec.  303.1 by replacing the phrase ``Economic 
Development Districts'' with ``District Organizations.'' We received 
one comment stating that Sec.  303.1 ``expand[s] eligibility for 
planning assistance to community development corporations and non-
profit regional development organizations.'' EDA did not expand the 
list of Eligible Recipients for Planning Investments because public and 
private non-profit organizations already are included in the definition 
of Eligible Recipient in Sec.  300.3. Rather, we included community 
development corporations and non-profit regional development 
organizations in our introductory discussion addressing the purpose and 
scope of Planning Investments.
    We received approximately 130 identical comments expressing 
``concern about several of the application requirements, including the 
primary focus on creating `higher-skill, higher-wage jobs' and 
involving business leaders in every phase of the CEDS process.'' 
Section 303.1 states that the purpose of EDA Planning Investments in 
part includes assistance for short-term Planning Investments and State 
plans designed to create and retain higher-skill, higher-wage jobs. EDA 
believes this goal must be achieved particularly in the most 
economically distressed Regions, as that is where high levels of 
unemployment and underemployment exist. Additionally, in considering an 
application for a Planning Investment under Sec.  303.3(a), EDA will 
consider the involvement of the Region's business leadership in the 
preparation of the CEDS, short-term planning activities, or in the 
development of State plans. In line with its goal of fostering Regional 
partnerships, EDA believes that communities and Regions must access 
expert resources and interact with business leaders and entrepreneurs 
in

[[Page 56662]]

order to improve their economy and to create private sector jobs.
    EDA received approximately 136 identical comments on the definition 
of ``Planning Organization'' found in Sec.  303.2, which expressed 
strong opposition to ``the removal of the specific reference to 
District Organizations and Indian tribes as the primary planning 
partners of the agency.'' The Interim Final Rule simplified the former 
definition of Planning Organization by replacing the references to 
Economic Development Districts and Indian Tribes with the term 
``Recipient.'' The definition of Eligible Recipient in Sec.  300.3 
includes District Organizations and Indian Tribes; therefore, the 
definition of Planning Organization in Sec.  303.2 involves no 
substantive change from EDA's former regulations. To clarify the 
functions of a Planning Organization, this final rule amends the 
definition of Planning Organization by inserting the phrase ``and 
implement'' after the word ``develop.''
    EDA received two comments on the application requirements for 
Planning Investments set forth in Sec.  303.3(a). The comments 
expressed, ``It seems redundant to require a `pre-application' when 
seeking a planning grant, as mentioned in the interim final rule; it 
seems that this is unnecessary with the mid-year and annual reports 
required currently.'' The commenters questioned whether a pre-
application for Investment Assistance is necessary for all Planning 
Investments. By adding a new subsection to Sec.  301.7 as discussed in 
detail above, EDA makes it clear in this final rule that in certain 
circumstances, EDA may instruct an Eligible Applicant or Recipient to 
submit an application for Investment Assistance rather than a pre-
application. To ensure that the title of Sec.  303.3 conforms to its 
content, this final rule adds ``and evaluation criteria'' to the title. 
In addition, we restate the lead-in statement for paragraphs (a)(1) 
through (5) as ``In addition, applications for Planning Investments 
must include information about the following,'' and delete the phrase 
``Quality of'' in paragraph (a)(1) to make clear that EDA requires 
Eligible Applicants to provide the information described in Sec.  
303.3(a) for all Planning Investment applications. We also make a 
grammatical revision to Sec.  303.3(a)(5) by replacing the word 
``during'' with ``through.''
    Section 303.3(b) provides that funded Recipients will be evaluated 
on the extent of continuing distress within the Region, their past 
performance, and the overall effectiveness of their CEDS. For 
conformity with the revisions we make to Sec.  303.3(a) in this final 
rule, we replace the phrase ``requirements of'' with ``criteria set 
forth in'' in Sec.  303.3(b).
    We received approximately 212 comments on Sec.  303.4(c). The 
majority of these comments expressed ``concern about the lack of 
details on the funding of [P]lanning grants'' and stated that the 
Interim Final Rule is ``vague on the link between receiving a 
designation as a District Organization and annual and long-term 
financial support from EDA.'' EDA did not intend for Sec.  303.4(c) to 
suggest that Investment Assistance to Planning Organizations would be 
``one-time only'' awards. We fully expect to continue our successful 
partnership with Planning Organizations representing Economic 
Development Districts (as well as to fund designated but unfunded 
Districts). This final rule clarifies the regulation by stating that 
EDA will provide a Planning Investment for the period of time required 
to develop, revise or replace, and implement a CEDS, generally in 
``thirty-six (36) month renewable Investment award periods.'' The 
phrase ``thirty-six (36) month renewable Investment award periods'' 
clarifies that the regulation contemplates continuation of EDA's 
historic relationship with Districts.
    Consistent with the focus on obtaining a well-prepared and 
demonstrable CEDS, Sec.  303.5 provides that Planning Investments may 
be used to pay only direct and indirect costs (administrative or 
otherwise) attributable to the development and implementation of a 
CEDS. EDA received approximately 279 identical or nearly identical 
comments on this provision, which expressed strong opposition to 
limiting direct and indirect costs to activities related to the CEDS. 
As provided in Sec.  303.5(a), EDA determines allowable costs by 
reference to ``applicable Federal cost principles,'' namely, the 
following Office of Management and Budget (``OMB'') Circulars: Circular 
No. A-122 titled ``Cost Principles for Nonprofit Organizations'' (2 CFR 
part 230); Circular No. A-21 titled ``Cost Principles for Education 
Institutions'' (2 CFR part 220); and Circular No. A-87 titled ``Cost 
Principles for State, Local and Indian Tribal Governments'' (2 CFR part 
225). Upon closer examination of Sec.  303.5, EDA believes subsection 
(c) regarding allowable ``indirect costs'' is superfluous inasmuch as 
these costs would be eligible consistent with EDA's application of 
these OMB circulars to indirect cost rates. Therefore, this final rule 
removes Sec.  303.5(c) in its entirety.
    This final rule also removes Sec.  303.5(b) in its entirety because 
the express statement that Planning Investments may only be used to pay 
the costs attributable to the EDA-approved scope of work (i.e., for the 
purpose of developing and implementing a CEDS) does not distinguish 
Planning Investments from any other EDA Investment. Generally, all EDA 
Investment Assistance may be used to pay costs of activities that are 
directly attributable to the Project's scope of work. To ensure clarity 
and better understanding of the concepts explained above, this final 
rule reformats Sec.  303.5 and revises the sentence to indicate that 
Planning Investments may be used to pay the direct and indirect costs 
incurred by a Planning Organization in the development, replacement or 
revision, and implementation of a CEDS and for related short-term 
planning activities. Rewritten in this manner, EDA believes Sec.  303.5 
is consistent with the Senate Report accompanying the 2004 Act, which 
states that authorized uses of funds under section 203 of PWEDA include 
``administrative expenses to support the on-going formulation and 
implementation of comprehensive economic development strategies.'' S. 
Rep. No. 108-382, at 4 (2004).
    Section 303.6(a) requires that a Strategy Committee (appointed by a 
Planning Organization) represent the main economic interests of the 
relevant Region by including a majority of its representatives from 
businesses within the Region. The Strategy Committee is tasked with 
developing (and revising or replacing as necessary) the Planning 
Organization's CEDS. EDA received approximately 585 identical or nearly 
identical comments on Sec.  303.6(a), which expressed strong 
``oppos[ition] to efforts [that] reduce the involvement and control of 
local government officials in strategic planning and development 
activities.'' In order to sustain long-term Regional economic growth, 
EDA believes that contributions from the private sector are paramount 
for the CEDS development. We do not believe this requirement is 
restrictive or that it minimizes local government participation in 
local development activities. Rather, when Sec.  303.6(a) is read in 
its entirety, it requires that innovative public and private leaders 
create a strong sense of Regional cooperation in order to develop a 
viable CEDS.
    We received one comment on Sec.  303.6(c). This section requires 
Planning Organizations to be accountable to EDA for updated CEDS 
performance. The commenter opined that this provision ``does not go far 
enough,'' and stated that ``[t]here needs

[[Page 56663]]

to be some requirement that [Planning] [O]rganizations put a plan for 
self-sufficiency in each CEDS, and that they attain self-sufficiency 
within 10 years of first receiving EDA Investment Assistance.'' EDA 
does not intend to implement such a requirement absent Congressional 
authorization.
    To improve the structure of Sec.  303.7(a) and improve readability, 
this final rule amends the second sentence in Sec.  303.7(a) by 
deleting the phrase ``, and assigning lead organizations 
responsibilities for execution of the CEDS'' and placing ``and'' before 
the word ``identifying.'' We received one comment asking for EDA to 
define the word ``critical'' in the last sentence of Sec.  303.7(a). 
This final rule does not revise this sentence in Sec.  303.7(a) at this 
time because EDA believes it sufficiently relates that the creation of 
a successful CEDS depends heavily on its participants. If CEDS 
development galvanizes a partnership between business and government, 
it will play a ``critical'' or essential role in enabling and 
strengthening Regional economies.
    Section 303.7(b) lists specific technical requirements related to 
the preparation of the CEDS document. These requirements include (i) a 
discussion of private sector participation in the CEDS work, rather 
than community participation, (ii) a specific plan of action with 
certain criteria for gauging the implementation of the goals and 
objectives of the CEDS, and (iii) specific performance measures for 
appraising the Planning Organization's development and execution of the 
CEDS. We received approximately 83 identical comments stating support 
of these requirements. The commenters stated that ``the new technical 
requirements of the CEDS process are sound and beneficial to local 
development efforts.'' This final rule amends Sec.  303.7(b)(7) by 
replacing the phrase, ``A section identifying economic clusters that 
are growing or in decline within the Region'' with ``A section 
identifying economic clusters within the Region, focusing on those that 
are growing or in decline.'' We revise Sec.  303.7(b)(7) as such to 
clarify that Planning Organizations should identify all economic 
clusters in the Region and specify those that are growing or in 
decline. For clarity, we also insert the word ``development'' after 
``economic'' in Sec.  303.7(b)(10).
    Section 303.9 outlines EDA's requirements for short-term Planning 
Investment Assistance. This final rule amends Sec.  303.9(c) by 
replacing the phrase ``program reports'' with ``progress reports,'' as 
the incorrect use of the word ``program'' in the Interim Final Rule was 
an oversight.
    EDA received two comments expressing that part 303 ``focus[es] 
solely on the CEDS without clearly defining who will be responsible for 
implementation of the [CEDS].'' As noted earlier, the Strategy 
Committee is tasked with developing (and revising or replacing as 
necessary) the CEDS. EDA believes it is the responsibility of the 
District Organization as a whole to implement the technical elements of 
the CEDS, which are set forth in Sec.  303.7(b).
    We received one comment asking if there are any changes in the 
Interim Final Rule for Planning Investments to Indian Tribes. All 
Planning Investments, whether awarded to District Organizations, Indian 
Tribes, community development corporations, non-profit regional 
planning organizations or other Eligible Recipients (as listed in Sec.  
303.1), are governed by the requirements of part 303. The Interim Final 
Rule made no specific changes to this part with respect to Planning 
Investments to Indian Tribes. Investments to Indian Tribes are subject 
to the same requirements as other Eligible Recipients and the 
discussion in this preamble applies equally to them.
    EDA received approximately 81 identical comments expressing concern 
that the Interim Final Rule is ``silent on the transition period and 
guidelines for thousands of local communities already covered by an 
existing CEDS, whether prepared by a District Organization, Indian 
[T]ribe or other [P]lanning [O]rganization.'' EDA does not believe that 
administrative or instructional guidelines on how Planning 
Organizations will transition to comply with the requirements of parts 
303 and 304 belong in a set of regulations. This final rule does not 
amend the regulations at this time. However, EDA is cognizant that 
Recipients require a reasonable amount of time to comply with the new 
requirements. To that end, EDA is providing a one-year period for all 
Planning Organizations to demonstrate compliance with the requirements 
with parts 303 and 304. For all awards made in FY 2006, the Planning 
Organization must demonstrate compliance with all new requirements one 
year from the date of receiving EDA Investment Assistance.

Part 304--Economic Development Districts

    Part 304 on Economic Development Districts (also referred to as a 
``District'' or an ``EDD'' in Sec.  300.3) sets forth the Regional 
eligibility requirements that must be satisfied in order for EDA to 
consider a District Organization's request to designate a Region as an 
EDD, including submission of an EDA-approved CEDS, and the District 
Organization's formation and organizational requirements. This part 
also contains provisions relating to termination and performance 
evaluations of District Organizations. As described in detail below, 
the December 15, 2005 Rulemaking revised sections in this part in 
accordance with the Conference Report accompanying the 2006 
Appropriations Act.
    All provisions with respect to formation, organization and 
operation of a District Organization are contained in Sec.  304.2. EDA 
received over one thousand identical or nearly identical comments on 
the provision in Sec.  304.2(c)(2), which requires a District 
Organization's governing body to include a majority of Private Sector 
Representatives (as defined in Sec.  300.3). The majority of these 
comments ``adamantly opposed [ ] the new requirements that shift the 
governing bodies of [District Organizations] from the majority control 
of local government officials to unnamed private sector 
representatives.'' Section 304.2(c)(2) never became effective on 
October 1, 2005, as the September 30, 2005 and November 14, 2005 final 
rules delayed its effective date until January 31, 2006.
    As directed in the Conference Report accompanying the 2006 
Appropriations Act, EDA revised Sec.  304.2(c)(2) in the December 15, 
2005 Rulemaking as follows: (i) A District Organization's governing 
body must, unless otherwise prohibited by applicable State or local 
law, include at least one (1) Private Sector Representative, together 
with one (1) or more of the following: Executive directors of chambers 
of commerce, or representatives of institutions of post-secondary 
education, workforce development groups, or labor groups, all of which 
(including the Private Sector Representative) must comprise in the 
aggregate a minimum of 35% of the District Organization's governing 
body; and (ii) if the District Organization demonstrates an inability 
to locate a Private Sector Representative to serve on its governing 
body following extensive due diligence (as determined by EDA), the 
Assistant Secretary may waive the Private Sector Representative 
requirement. The December 15, 2005 Rulemaking also added a provision 
stating that the District Organization's governing body will also have 
at least a simple majority of its membership who are elected officials 
and/or employees of a general purpose unit of local government who have 
been appointed to represent the government.

[[Page 56664]]

    EDA received approximately 795 identical or nearly identical 
comments on Sec.  304.2(d), which provides that District Organizations 
may contract for services to accomplish approved scopes of work for 
Planning Investments. The majority of these comments stated, ``We are 
specifically opposed to * * * minimizing local government participation 
in local planning and development activities.'' As directed in the 
Conference Report accompanying the 2006 Appropriations Act, EDA revised 
Sec.  304.2(d) in the December 15, 2005 Rulemaking to specify that a 
District Organization will engage in the full range of economic 
development activities listed in its EDA-approved CEDS, which may 
include (i) coordinating and implementing economic development 
activities in the District; (ii) carrying out economic development 
research, planning, implementation and advisory functions identified in 
the CEDS; and (iii) coordinating the development and implementation of 
the CEDS with other local, State, Federal and private organizations. 
This subsection continues to give District Organizations the discretion 
to contract for services as necessary.
    EDA also received public comment on sections describing District 
termination, specifically subsections 304.3(b) and (c). EDA received 
approximately 520 identical or nearly identical comments on Sec.  
304.3(b). These comments expressed concern ``that the agency has added 
new criteria for the termination of District Organizations that are 
subjective and lack any appeals process.'' We received approximately 87 
identical or nearly identical comments on Sec.  304.3(c), which 
expressed concern ``that the agency may use the [Federal Funding 
Opportunity] process to change its policies, guidelines and performance 
standards without public comment.''
    Section 304.3(b)(2) provides that EDA may terminate a Region's 
designation as an Economic Development District when EDA determines 
that the District Organization fails to execute its CEDS according to 
the development, implementation and other performance measures set 
forth in the CEDS. In accordance with the Conference Report 
accompanying the 2006 Appropriations Act, the December 15, 2005 
Rulemaking added a new subsection (c) to Sec.  304.3 to clarify that 
prior to terminating a District's designation under subsection 
304.3(b)(2), EDA will consult with the District Organization and 
consider all facts and circumstances surrounding the District 
Organization's operations. Section 304.3(c) also provides that EDA will 
not terminate a District's designation based on circumstances beyond 
the control of the District Organization (e.g., natural disaster, plant 
closure, overall economic downturn, sudden and severe economic 
dislocation, or other situation).
    This final rule does not amend Sec.  304.3(d). We believe that the 
December 15, 2005 Rulemaking changes to Sec.  304.3 safeguard District 
Organizations adequately with respect to District termination. EDA 
cannot use the Federal Funding Opportunity announcement process to 
change the regulatory standards for termination or modification of the 
designation of Economic Development Districts.
    Information with respect to the performance evaluations of District 
Organizations, formerly codified in part 318 of EDA's former 
regulations, is now incorporated into Sec.  304.4. Pursuant to PWEDA, 
EDA will evaluate each District Organization within three (3) years 
after the initial Investment award and at least once every three (3) 
years thereafter, so long as the District Organization continues to 
receive Investment Assistance. On Sec.  304.4(a), we received 
approximately 415 identical comments stating that ``most of the 
requirements for grantee performance measurements are very vague and 
open to varying agency interpretations among the different regional 
offices.'' We do not believe that the provisions of Sec.  304.4(a) are 
vague. In fact, unlike EDA's former regulations, the performance 
evaluation provisions of Sec.  304.4(a) contain specific requirements 
for Economic Development Districts, such as the continuation of 
Regional eligibility of the District, the management of the District 
Organization, and the implementation of its CEDS. EDA's regional 
offices are directed to interpret and apply EDA's regulations 
consistently and uniformly across all regions in the United States. For 
these reasons, this final rule does not amend Sec.  304.4(a).
    Last, EDA received four comments expressing ``concern with the 
elimination of up to 10% additional assistance if a project is located 
within a designated Economic Development District.'' Because former 
section 403 of PWEDA was eliminated by the 2004 Act, EDA removed from 
its regulations the ten (10) percent EDA ``bonus'' funding for certain 
Projects located in Economic Development Districts. Because EDA must 
implement its statutory mandate of PWEDA, EDA is unable to reinstate 
the ten (10) percent bonus.

Part 305--Public Works and Economic Development Investments

    Part 305 describes general information about the scope of EDA's 
Public Works program, award and application requirements, and 
provisions for EDA's and Recipients' duties. EDA received no public 
comments on this part. Section 305.1 provides information on the 
purpose and scope of Public Works and Economic Development Investments. 
The criteria section (Sec.  305.2) specifies the scope of activities 
eligible for consideration of a Public Works Investment in subsection 
(a), and sets forth a list of determinations in subsection (b) that EDA 
must reach in order to award a Public Works Investment.
    The application requirements for Public Works Investments are set 
forth in Sec.  305.3. The section on Public Works Projects for design 
and engineering work was moved from subpart B and placed as Sec.  305.4 
under subpart A. This section includes a provision to ensure awareness 
that EDA's funding of a Project for design and engineering work does 
not in any way commit EDA to fund construction of the Project.
    The first section under subpart B is Sec.  305.5, titled Project 
administration by District Organization. These provisions are included 
in this subpart because the provisions are applicable to construction 
projects only. Section 305.6 combines two former sections titled 
Construction Management services and Design/Build method of 
construction (Sec. Sec.  305.10 and 305.11 of EDA's former regulations) 
and addresses and accounts for the majority of Public Works Investments 
that lend themselves to the traditional design/build method of 
construction. However, Recipients may employ other construction 
methods, too. This final rule amends the second sentence of Sec.  
305.6(a) by replacing the phrase ``design-build'' with ``design/bid/
build.''
    Similar to the provisions in Sec.  305.6, Sec.  305.7 includes 
information that the Recipient must submit to EDA to justify the use of 
``in-house forces.'' Section 305.8 provides that Recipients of EDA 
construction awards must obtain prior approval for the use of furnished 
equipment and materials. Requests must show that costs claimed for 
furnished equipment and materials are competitive with local market 
costs for similar equipment and materials. Section 305.9 contains 
specific information that the Recipient must provide to EDA for 
approval of any Project that necessitates phasing, including a 
description of elements to be completed in each phase and

[[Page 56665]]

detailed construction cost estimates for each phase. The last five (5) 
sections in subpart B, Sec. Sec.  305.10 (Bid underrun), 305.11 
(Contract awards; early construction start), 305.12 (Project sign), 
305.13 (Contract change orders) and 305.14 (Occupancy prior to 
completion), contain the same substance as found in EDA's former 
regulations. However, EDA rewrote these sections in the Interim Final 
Rule to eliminate ambiguity or extraneous provisions.
    Except for the revision made in Sec.  305.6(a) stated above, this 
final rule does not amend part 305 of the Interim Final Rule.

Part 306--Training, Research and Technical Assistance Investments

    Part 306 was primarily reorganized, shortened and rewritten in the 
Interim Final Rule for increased understanding and inclusiveness of all 
pertinent information. Section 306.1(a), dealing with the scope of 
Local and National Technical Assistance Investments, captures diverse 
purposes for such Investments. Section 306.2, titled Award 
requirements, is the combination of Sec. Sec.  307.2 and 307.10 of 
EDA's former regulations. Similarly, the content of Sec. Sec.  307.3 
and 307.11 in EDA's former regulations was merged into Sec.  306.3 and 
re-titled Application requirements. Section 306.3(c) specifically 
cross-references Sec.  301.4(b)(4), which sets forth the governing 
provisions for determining applicable Investment Rates for Projects 
under part 306. A cross-reference to Sec.  301.4(b) is made in 
applicable sections of all parts relating to specific EDA programs 
(i.e., parts 303-307).
    EDA received approximately seven comments on Sec.  306.3(c) which 
stated that the provision is ``much too demanding in terms of local 
match required.'' Section 301.4(b)(4) ties the maximum allowable 
Investment Rate for Local and National Technical Assistance Projects to 
that otherwise applicable to the Region in which the Project will be 
located. Section 301.4(b)(4) also authorizes a maximum Investment Rate 
of up to a one hundred (100) percent for Projects of a national scope 
under 13 CFR part 306 and for all other projects under 13 CFR part 306, 
in appropriate circumstances. We believe the maximum allowable 
Investment Rates for Local and National Technical Assistance 
Investments are fair and will preserve the Local Share requirement to 
make certain Recipients commit their own funds to help ensure the 
success of the Projects.
    In the Interim Final Rule, the title of subpart B was changed from 
University Center Program to University Center Economic Development 
Program. To mirror the organization and sequence of Sec. Sec.  306.2 
and 306.3 in subpart A, Sec. Sec.  306.5 and 306.6 are named Award 
requirements and Application requirements, respectively. Section 306.5 
states that EDA provides Investment Assistance to University Center 
Projects based on the selection criteria in part 301, the competitive 
selection process outlined in the applicable FFO, and the extent to 
which the Eligible Applicant demonstrates other more specific, related 
criteria.
    Section 306.6 sets forth application requirements for University 
Center Projects. Section 306.6(c) cross-references Sec.  301.4(b)(4) 
for information regarding the applicable Investment Rate for University 
Center Projects. EDA received approximately fourteen comments on Sec.  
306.6(c), each that stated ``we are very troubled by the proposal to 
change the match requirements on the EDA [U]niversity [C]enter grant[s] 
and strongly oppose such a move.'' Section 206 of PWEDA (42 U.S.C. 
3146) requires EDA to consider the ``relative needs'' of eligible 
areas. As noted above, we believe Sec.  301.4(b) appropriately takes 
``relative needs'' into account for purposes of determining the maximum 
allowable Investment Rates and the Local Share requirements for EDA 
Investments. Accordingly, this final rule does not amend Sec.  
306.6(c).
    The University Center Economic Development Program establishes a 
three-year competitive cycle in which performance evaluations occurring 
within three (3) years after the initial Investment award will 
determine if a University Center may qualify to compete again for 
Investment Assistance. Consistent with section 506(d)(2) of PWEDA (42 
U.S.C. 3196), Sec.  306.7 contains an additional performance evaluation 
standard by which University Centers will be evaluated. At a minimum, 
University Centers will be evaluated specifically with regard to their 
contributions to providing technical assistance, conducting applied 
research, meeting program performance objectives and disseminating 
Project results in accordance with the scope of work funded during the 
evaluation period.
    This final rule adopts part 306 of the Interim Final Rule in its 
entirety.

Part 307--Economic Adjustment Assistance Investments

    EDA extensively considered and examined part 308 of EDA's former 
regulations in order to draft part 307 of the Interim Final Rule. This 
part was greatly improved by making effective use of defined terms in 
subpart A (covering Economic Adjustment Assistance Investments) and in 
subpart B (covering special requirements for RLF Grants). EDA did not 
receive any public comments on subpart A of part 307, covering 
Sec. Sec.  307.1 through 307.6. This final rule amends Sec. Sec.  
307.1, 307.2 and 307.4 as described below.
    To ensure conformity between the titles of Sec. Sec.  307.1 and 
307.2 and their respective contents, this final rule changes the title 
of Sec.  307.1 to Purpose and the title of Sec.  307.2 to Criteria for 
Economic Adjustment Assistance Investments. For improved clarity, we 
also move Sec.  307.1(b) to Sec.  307.2 and delete Sec.  307.2(b) in 
its entirety because an identical statement is already in Sec.  
307.4(d). This final rule revises Sec.  307.4(d) to read as ``Funding 
priority considerations for Economic Adjustment Assistance may be set 
forth in an FFO.''
    In drafting the Interim Final Rule, EDA revised subpart A to follow 
PWEDA and read more concisely. For example, in Sec.  307.3 (titled Use 
of Economic Adjustment Assistance Investments), EDA introduced the new 
defined terms ``Strategy Grant,'' referring to Economic Adjustment 
Assistance Investments that help develop CEDS to alleviate long-term 
economic deterioration or a sudden and severe economic dislocation, and 
``Implementation Grant,'' defined as an Economic Adjustment Assistance 
Investment used to fund a Project implementing a CEDS. Section 308.4 in 
EDA's former regulations, titled Selection and evaluation factors, was 
renamed Award requirements in Sec.  307.4, parallel with similar 
provisions in other program parts, and reorganized and sub-titled for 
clarity.
    EDA redrafted in the Interim Final Rule Sec.  307.6 to emphasize 
and cross-reference relevant parts or subparts in the chapter with 
respect to Strategy Grants and Implementation Grants. For instance, 
Implementation Grants involving construction must meet the requirements 
for Public Works Investments, whereas Implementation Grants not 
involving construction must follow the requirements for Local and 
National Technical Assistance Investments. Accordingly, the Interim 
Final Rule references parts 303, 305 and 306 in Sec.  307.6 for 
additional requirements that Strategy Grants and Implementation Grants, 
as appropriate, must fulfill (in addition to the post-approval 
stipulations set forth in Sec.  302.18).
    Except for an amendment made to Sec.  307.9 as explained below, 
this final rule does not substantively amend subpart B of part 307. 
However, we have

[[Page 56666]]

re-ordered some of the sections in subpart B to logically separate pre-
approval actions from post-approval actions. The following discussion 
summarizes the provisions of this subpart. The first section, Sec.  
307.7, states that subpart B sets forth the requirements applicable to 
Economic Adjustment Assistance Grants used to capitalize or 
recapitalize RLFs. To ensure accuracy and completeness in this subpart, 
EDA rewrote in the Interim Final Rule the defined terms in Sec.  307.8, 
which relate to RLF Grants. EDA also introduced new defined terms, such 
as ``Exempt Security,'' ``Sale,'' ``SEC,'' ``Security'' and ``RLF Third 
Party,'' in large part to interpret the provisions of section 209(d)(2) 
and (4) of PWEDA (42 U.S.C. 3149).
    The requirements for RLF Plans are set forth in Sec.  307.9, which 
states that EDA will evaluate an RLF Plan based on its ability to 
``demonstrate an adequate understanding of commercial loan portfolio 
management procedures, including loan processing, underwriting, 
closing, disbursements, collections, monitoring, and foreclosures'' 
(see Sec.  307.9(b)(3)). We received two comments opposing the 
provision in Sec.  307.9 that requires the RLF Plan be submitted to and 
approved by EDA and passed by resolution of the RLF Recipient's 
governing board prior to initial disbursement of EDA funds. The 
commenters indicated that from a practical standpoint, it may not be 
possible for a State or large city to pass a resolution accepting an 
RLF Plan; however, a resolution requirement may be more reasonable for 
a non-profit organization. In response to these comments and in order 
to maintain necessary flexibility in EDA's grant-making processes and 
requirements, this final rule revises the second sentence in Sec.  
307.9 to require that the Plan be submitted to and approved by EDA. EDA 
will require a resolution by the RLF Recipient's governing board on a 
case-by-case basis.
    This final rule moves Sec.  307.16, titled Disbursement of funds to 
Revolving Loan Funds, to Sec.  307.11 because it describes certain pre-
approval requirements that must be satisfied prior to any disbursement 
of EDA funds (e.g., evidence of fidelity bond coverage; establishment 
of an EDA funds account). This section was revised and reorganized in 
the Interim Final Rule from Sec.  308.16 of EDA's former regulations. 
Section 307.12 makes explicit the general rule that RLF Income must be 
placed into the RLF Capital base for the purpose of making loans or 
paying for eligible and reasonable administrative costs associated with 
the RLF's operations. Section 307.12(c) provides a priority of payment 
schedule for proceeds on a defaulted RLF loan that is not subject to 
liquidation pursuant to Sec.  307.20.
    The next three sections, Sec. Sec.  307.13, 307.14 and 307.15 
(titled Records and retention; Revolving Loan Fund semi-annual and 
annual reports; and Prudent management of Revolving Loan Funds), are 
substantively the same as Sec. Sec.  308.13, 308.14 and 308.15 of EDA's 
former regulations. The main focus of the revision to these sections, 
as seen in the Interim Final Rule, was to incorporate defined terms to 
improve the explanation of the specific documentation, accounting and 
reporting requirements. Additionally, the conflicts of interest 
provisions in Sec.  308.15(e) in EDA's former regulations were moved to 
Sec.  302.17(c) to improve organization and referencing facility.
    This final rule moves Sec.  307.17 (titled Effective utilization of 
Revolving Loan Funds) to Sec.  307.16. This section was slightly 
reworded in the Interim Final Rule from what appeared in Sec.  308.17 
of EDA's former regulations. Those revisions largely incorporated the 
use of defined terms (e.g., Closed Loan; RLF Capital). This final rule 
also moves Sec.  307.18 (titled Uses of capital) to Sec.  307.17. This 
section sets forth specific restrictions on the use of RLF Capital. 
Section 307.17(d) clarifies that In-Kind Contributions may satisfy 
Matching Share requirements when specifically authorized in the RLF 
Grant and may be used to provide technical assistance to borrowers or 
for eligible RLF administrative costs.
    This final rule moves Sec.  307.11, which addresses the addition of 
lending areas and the merger of RLFs, to Sec.  307.18. In this section, 
EDA (i) correlated the substance of the section to applicable 
provisions in section 209 of PWEDA (42 U.S.C. 3149), (ii) eliminated 
information no longer applicable due to the passage of the 2004 Act, 
and (iii) explained and expanded important concepts in an orderly, 
coherent manner with the use of defined terms. In the Interim Final 
Rule, EDA changed the title of the section from Lending areas and 
modification of lending areas to Addition of lending areas; merger of 
RLFs, to highlight the increased flexibility that PWEDA affords to RLF 
Recipients for consolidating and merging RLF Grants. Section 
307.18(a)(1) sets forth the preconditions that must be met in order for 
EDA to approve the creation of a ``New Lending Area.'' Similarly, Sec.  
307.18(b) sets forth the preconditions for EDA to approve a single RLF 
Recipient's or multiple RLF Recipients' merger of RLFs. The 
requirements in subparagraphs (1) and (2) are substantively the same 
regarding single RLF Recipients and multiple RLF Recipients. Each must 
meet the requirements to obtain annual report status (set forth in 
Sec.  307.14) and amend and consolidate the RLF Plans to account for 
the merger. Prior to EDA's disbursement of additional funds to the RLF 
Recipient (or surviving RLF Recipient), EDA must determine a new 
Investment Rate for the New Lending Area.
    EDA drafted Sec. Sec.  307.19 and 307.20 of the Interim Final Rule 
as new provisions to accomplish the authorization for EDA's Assistant 
Secretary to ``assign or transfer assets of a revolving loan fund to a 
third party for the purpose of liquidation'' and ``take such actions as 
are appropriate to enable revolving loan fund operators to sell or 
securitize loans'' (see section 209(d)(2)(B) and (C) of PWEDA (42 
U.S.C. 3149)). First, in any Sale or Securitization in which an RLF 
Recipient may participate, Sec.  307.19 requires compliance with the 
Securities Act of 1933, the Securities Exchange Act of 1934 and any 
rule or regulation made public by the Securities and Exchange 
Commission (see section 209(d)(4) of PWEDA (42 U.S.C. 3149)). The RLF 
Recipient must use all proceeds from any Sale or Securitization to make 
additional RLF loans. Second, Sec.  307.20 provides the terms that will 
govern any partial or full liquidation of an RLF Recipient's RLF loans. 
In the case of an EDA-approved termination of an RLF Grant, EDA may 
assign or transfer assets of the RLF to an RLF Third Party for 
liquidation.
    Section 307.21 provides the process for termination of RLFs. 
Subsection 307.21(b) provides a new authority that allows EDA to 
approve a request from an RLF Recipient to terminate an RLF Grant. The 
last section, Sec.  307.22, was rephrased in the Interim Final Rule for 
clarity and completeness and covers the same material found at Sec.  
308.19 of EDA's former regulations.
    EDA did not receive any specific comments on Sec. Sec.  307.7 
through 307.21 of subpart B. However, we received approximately 87 
identical or nearly identical comments expressing general ``concern 
that RLF administrators are required to receive regular approval from 
EDA for a variety of activities and decisions.'' Other comments stated, 
``The EDA RLF program should not have additional constraining 
administrative oversight requirements imposed on it so as to interfere 
with the core mission of the program to provide capital and credit to 
regions and businesses not served by traditional lenders.'' EDA

[[Page 56667]]

believes the new RLF provisions in subpart B are consistent with the 
Senate Report accompanying the 2004 Act, which calls for the Assistant 
Secretary to ``promulgate regulations to improve the administration of 
[RLFs], consolidate [RLFs] at the grantee's request and transfer RLF 
portfolio assets to third parties for liquidation.'' S. Rep. No. 108-
382, at 6 (2004). Specifically, the strengthened audit and reporting 
requirements do not alter the original intent and scope of the RLF 
program or impose new cost burdens on RLF Recipients.

Part 308--Performance Incentives

    Part 308 incorporates new sections 215 and 216 of PWEDA (42 U.S.C. 
3154a; 42 U.S.C. 3154b). EDA received no comments on this part, nor 
does this final rule amend this part. The discussion below summarizes 
the part 308 provisions.
    For any construction Project awarded under parts 305 or 307 that is 
completed under projected cost pursuant to section 211 of PWEDA (42 
U.S.C. 3151), Sec.  308.1(a) provides that EDA may in its discretion 
allow the Recipient to use the excess funds to either increase the 
Investment Rate of the Project to the maximum percentage allowable 
under Sec.  301.4 for which the Project was eligible at the time of the 
Investment award, or further improve the Project consistent with its 
purpose.
    Additionally, section 215 of PWEDA (42 U.S.C. 3154a) authorizes the 
Assistant Secretary to make performance awards in connection with 
grants to Recipients for Public Works or Economic Adjustment Assistance 
Investments. Section 308.2(a) provides that, with respect to any such 
Investment, the Assistant Secretary may grant a performance award to 
the Recipient (on a discretionary basis) in an amount not to exceed ten 
(10) percent of the Project's Investment award. As discussed in the 
Conference Report accompanying the 2006 Appropriations Act, EDA revised 
Sec.  308.2(b) in the December 15, 2005 Rulemaking to better adhere to 
section 215 of PWEDA (42 U.S.C. 3154a). Specifically, EDA replaced the 
requirement that project performance be ``exceptional'' with the ``meet 
or exceeds'' threshold in section 215(b)(2) of PWEDA (42 U.S.C. 3154a).
    Section 308.2(c) provides that a Recipient may receive a 
performance award no later than three (3) years following the Project's 
closeout. Following section 215(e)-(f) of PWEDA (42 U.S.C. 3154a), 
Sec.  308.2(d) provides that performance awards may fund up to one 
hundred (100) percent of the cost of an eligible Project or any other 
authorized activity under PWEDA, and for the purpose of meeting the 
non-Federal share requirement of PWEDA or any other statute, the 
performance award amount will be treated as non-Federal funds. 
Additionally, EDA will set forth in an applicable FFO the requirements, 
qualifications, guidelines and procedures for performance awards, with 
all performance awards being subject to the availability of funds (see 
Sec.  308.2(e)).
    With respect to planning performance awards, Sec.  308.3 tracks the 
language of section 216 of PWEDA (42 U.S.C. 3154b). Section 308.3 
introduces that a Recipient may be eligible to receive a planning 
performance award in an amount not to exceed five (5) percent of the 
amount of the applicable Investment. As with performance awards made to 
Recipients of Public Works or Economic Adjustment Assistance 
Investments, the Assistant Secretary will make such awards on a 
discretionary basis. As set forth in Sec.  308.3(a), such awards are 
predicated on a finding that the Recipient actively participated in the 
economic development activities of the District and that the Project 
demonstrated exceptional fulfillment of one (1) or more components of 
the applicable CEDS.

Part 309--Redistributions of Investment Assistance

    The provisions in part 309 of the Interim Final Rule are new and 
were not in EDA's former regulations. EDA received no comments on this 
part. Except for a minor revision made to Sec.  309.1(a) as described 
below, this final rule does not amend this part. The discussion below 
summarizes part 309.
    In accordance with new section 217 of PWEDA (42 U.S.C. 3154c), 
information with respect to redistributions of Investment funds for 
Planning, Public Works, and Training, Research and Technical Assistance 
Investments is presented in Sec.  309.1. Specifically, Sec.  309.1(a) 
provides that a Recipient under any program governed by parts 303, 305 
and 306 may directly expend the Investment Assistance, or, with prior 
EDA approval, redistribute such funds in the form of a subgrant to 
another Eligible Recipient that qualifies for EDA Investment Assistance 
under the same program part as the Recipient. All subgrants must be 
subject to the same terms and conditions applicable to the Recipient 
under the original Investment award. To improve sentence structure, 
this final rule changes the phrase ``Except as provided by * * *.'' to 
``Except as provided in * * *.'' in the first sentence of Sec.  
309.1(a). Subsection 309.1(b) stipulates that Investment Assistance 
received under parts 303 or 305 may not be redistributed to a for-
profit entity.
    Section 309.2 addresses redistributions under part 307 for Economic 
Adjustment Assistance Investments. This section reads similarly to 
Sec.  309.1. However, a Recipient under part 307 may redistribute 
Investment funds to another Eligible Recipient in the form of a Grant 
or to a non-profit and private for-profit entity in the form of a loan 
(or loan guarantee) under subpart B of part 307.

Part 310--Special Impact Areas

    Part 310 corresponds to new section 214 of PWEDA (42 U.S.C. 3154), 
which allows the Assistant Secretary to waive the CEDS requirements of 
section 302 of PWEDA (42 U.S.C. 3162) for a Project that will fulfill a 
``pressing need'' of the Region or prominently address or alleviate 
Regional underemployment or unemployment. EDA did not receive any 
public comments on part 310. EDA does not make any changes to this 
part.
    Section 310.1 generally tracks section 214 of PWEDA (42 U.S.C. 
3154), but makes clear that any waiver of the requirements of section 
302 of PWEDA (42 U.S.C. 3162) applies only to an individual Project, 
not to all Projects located within the Region.
    Section 310.2(a) interprets the ``pressing need'' language of the 
new PWEDA provision and reflects standard EDA policy priorities, based 
on, among other things, assistance to Indian Tribes, rural and severely 
distressed Regions, and the existence of a Special Need. Similarly, 
subsections 310.2 (b) and (c) set forth quantitative measures of 
excessive unemployment and as indicators of useful employment 
opportunities, such as the Project's prospective job creation, 
commitment of financial investment by private entities, and application 
of innovative technology.

Part 311--[Reserved]

Part 312--[Reserved]

Part 313--[Reserved]

Part 314--Property

    Part 314 sets forth the rules governing the uses of and EDA's 
interests in Property acquired, in whole or in part, or improved with 
EDA Investment Assistance. The changes made by the Interim Final Rule 
to the Real Property provisions in subpart B primarily reflect EDA 
policies regarding the increasing use of ``public-private'' 
partnerships to spur Regional economic development. EDA received no 
comments on this part.

[[Page 56668]]

The discussion below explains changes made to Sec. Sec.  314.1, 314.4, 
314.6, 314.7 and 314.10 by this final rule and summarizes changes 
previously made by the Interim Final Rule to specific sections of part 
314.
    In the Interim Final Rule, EDA revised defined terms from EDA's 
former regulations and added new defined terms in Sec.  314.1 for 
clarity and consistency. For example, the definition of ``Adequate 
Consideration'' includes the concept of ``fair market value'' (i.e., 
the purchase price agreed upon between a buyer and a seller acting in 
good faith, both having full knowledge of the material facts and 
circumstances surrounding the contemplated transaction). In comparison, 
EDA's former regulations used a ``fair and reasonable'' determination 
to define Adequate Consideration. This final rule removes the defined 
terms ``Encumbrance'' and ``Encumber.'' These terms were defined in 
Sec.  314.1 as having the meaning ascribed to them in Sec.  314.6. 
Inasmuch as the title of Sec.  314.6 is Encumbrances, the reader will 
have no difficulty in finding and understanding EDA's discussion of 
these terms. For improved accuracy and understanding, this final rule 
also amends the definition of ``Estimated Useful Life'' to make clear 
that this term refers to the time span over which EDA participates and 
realizes the economic development benefits of its Investment in a 
Project.
    Section 314.2(a) provides that (i) Property acquired or improved, 
in whole or in part, with Investment Assistance is held in trust by the 
Recipient for the benefit of the Project and (ii) EDA maintains an 
equitable reversionary interest in such Property for the Estimated 
Useful Life of the Project (defined as the ``Federal Interest''). 
Section 314.2(b) is the same as the provisions set forth in EDA's 
former regulations and provides that when the Federal government is 
fully compensated for the Federal Share of Property acquired or 
improved, in whole or in part, with Investment Assistance, the Federal 
Interest is extinguished and the Federal government has no further 
interest in the Property.
    Section 314.3, titled Authorized use of Property, provides the 
circumstances in which Recipients may use Property acquired or 
improved, in whole or in part, with Investment Assistance. For example, 
Sec.  314.3(d) allows EDA to approve the transfer of Property from a 
Recipient to a Successor Recipient (or between two Successor 
Recipients) and clarifies that the process necessary to effectuate a 
substitution of the Recipient (or Successor Recipient) involves 
transferring the Project Property between the parties. The provision in 
Sec.  314.3(f) was introduced in the Interim Final Rule and was not 
present in EDA's former regulations. This provision authorizes EDA to 
approve, and a Recipient to undertake, an incidental use of Property 
that does not interfere with the scope or economic purpose of the 
Project. This incidental use is conditioned upon the Recipient's 
compliance with applicable law and the terms and conditions of the 
Investment Assistance.
    Section 314.4(a) provides that, with certain exceptions, the 
Federal government must be compensated for the Federal Share whenever, 
during the Estimated Useful Life of the Project, any Property acquired 
or improved (in whole in part) with Investment Assistance is Disposed 
of, encumbered, or no longer used for the purpose of the Project. This 
final rule amends Sec.  314.4(a) by replacing the phrase ``Uniform 
Administrative Requirements for Grants at 15 CFR parts 14 and 24'' with 
the phrase ``requirements at 15 CFR parts 14 or 24, as applicable.'' 
Section 314.4(b) sets out additional Unauthorized Uses of Property 
prior to the release of EDA's interest. Section 314.4(c) generally 
tracks Sec.  314.4(b) of EDA's former regulations and sets forth the 
remedies available to EDA to recover the Federal Share in the event of 
an Unauthorized Use. This final rule adds a new sentence to subsection 
(c) to restore the language that previously was set out in Sec.  
314.5(d) of EDA's former regulations, which specifies that payment of 
the Federal Share in accord with this section extinguishes the Federal 
Interest in the Property. Section 314.5(d) of EDA's former regulations 
was moved to Sec.  314.2(b) in the Interim Final Rule, which covers 
Federal Interest provisions. We are adding a similar statement to Sec.  
314.4(c) concerning Unauthorized Use of Property to clarify that once 
the Federal Share is repaid, EDA has no continuing interest in the 
ownership, use or Disposition of the Property.
    Section 314.5 defines ``Federal Share'' and is substantively the 
same as Sec.  314.5(a) of EDA's former regulations. Similarly, Sec.  
314.6 is substantively the same as Sec.  314.6 of EDA's former 
regulations (although the provisions are reordered to present the 
general rule and exceptions in a more logical sequence) and, with 
certain exceptions, prohibits the encumbrance of Recipient-owned 
Property. To improve clarity, this final rule revises the first 
sentence in Sec.  314.6(a) by eliminating the phrase ``(collectively, 
an ``Encumbrance'' or to ``Encumber'').'' Further, this final rule adds 
the phrase ``, except to secure a grant or loan made by a Federal 
Agency or State agency or other public body participating in the same 
Project'' after the words ``or otherwise encumbered'' in the first 
sentence of Sec.  314.6(a). This revision aims to simplify program 
administration by allowing such encumbrances to remain on EDA-assisted 
Properties without requiring the administrative step of requesting and 
obtaining specific EDA approval. As a matter of policy, EDA 
automatically approves such requests and, therefore, the extra step is 
unnecessary. Section 314.6(b)(1) sets out a similar provision that 
authorized EDA to approve an encumbrance on Project Property when the 
Recipient has encumbered the Property at the behest of another Federal 
Agency. This final rule removes Sec.  314.6(b)(1) in its entirety and 
re-numbers paragraphs (b)(2), (b)(3) and (b)(4) as paragraphs (b)(1), 
(b)(2) and (b)(3), respectively.
    Section 314.7(a) sets forth the requirement that a Recipient must 
hold title to the Real Property required for a Project at the time 
Investment Assistance is awarded and must maintain title at all times 
during the Estimated Useful Life of the Project (the ``General Rule''). 
Section 314.7(c) sets forth the exceptions to the General Rule. For 
example, Sec.  314.7(c)(1) addresses the situation where Investment 
Assistance will be used to purchase Real Property required for a 
Project. Under Sec.  314.7(c)(1), EDA may determine that the Recipient 
satisfies the title ownership requirement of Sec.  314.7(a) if the 
Recipient has entered into a Real Property purchase agreement and 
provides reasonable assurances that it will obtain fee title for the 
Real Property needed for a Project prior to or concurrent with the 
initial disbursement of Investment Assistance.
    Subsections 314.7(c)(5) and (6) address situations where the EDA-
approved purpose of the Project is to construct facilities benefiting 
Real Property owned by the Recipient (Sec.  314.7(c)(5)) or privately-
owned Real Property (Sec.  314.7(c)(6)), where the benefited Real 
Property will ultimately be sold or leased to private parties. These 
provisions replace Sec.  314.7(c)(3) and (4) in EDA's former 
regulations and generally apply to all types of Real Property, 
including but not limited to industrial and commercial parks. For 
improved sentence structure and accuracy, this final rule reformats 
subsections (c)(5)(i)(D) and (c)(6)(i)(D) of Sec.  314.7 to clarify 
that the sale or lease of any portion of a Project during its Estimated 
Useful Life must be for

[[Page 56669]]

Adequate Consideration, and the terms and conditions of the Investment 
Assistance and the purpose(s) of the Project must continue to be 
fulfilled after the sale or lease. EDA may waive these requirements 
under the specific circumstance provided in both subsections, namely, 
after the ten (10) year anniversary of the date upon which the 
Investment Assistance was awarded. This final rule also removes the 
references in Sec. Sec.  314.7(c)(5)(i)(E) and 314.7(c)(6)(i)(E) to the 
number of times a Project is transferred, because EDA believes that the 
five (5) year anniversary periods (similar to the ten (10) year 
anniversary period noted above) are more accurate measures of whether a 
Project is continuing to serve the purpose(s) for which the underlying 
EDA Investment was made.
    Section 314.8 is substantively the same as Sec.  314.8 of EDA's 
former regulations and generally provides that for all Projects 
involving the acquisition, construction or improvement of a building, 
the Recipient must execute a lien, covenant or other statement of EDA's 
interest in such Real Property. Any lien, covenant or statement of 
EDA's interest must be perfected and recorded (in accordance with local 
law) in the jurisdiction in which the Real Property is located. Section 
314.9 is substantively the same as Sec.  314.9 of EDA's former 
regulations and provides that for all Projects involving the 
acquisition or improvement of significant items of Personal Property, 
the Recipient must execute a security interest or other statement of 
EDA's interest in such Personal Property. Any security interest or 
statement must be perfected and recorded in accordance with applicable 
law and with continuances re-filed, as appropriate.
    Subsections 314.10(a) through (c) are substantively the same as 
subsections 314.11(a) through (c) of EDA's former regulations. This 
final rule eliminates the phrase ``, in whole or in part,'' from Sec.  
314.10(a). In addition, in Sec.  314.10(c)(1), we replace the phrase 
``paragraph (a)'' with ``paragraphs (a) or (b),'' for conformance with 
Sec.  314.11(c)(1) of EDA's former regulations.
    The Interim Final Rule added a new section to EDA's regulations at 
Sec.  314.10(d). This section sets forth the procedures for requesting 
a release of EDA's Real Property or tangible Personal Property interest 
pursuant to section 601(d)(2) of PWEDA (42 U.S.C. 3211) and Sec.  
314.10. This final rule revises the second sentence of Sec.  
314.10(d)(1) to read as follows: ``In addition to the restrictions set 
forth in paragraph (c) of this section, the release may be conditioned 
upon some activity of the Recipient intended to be pursued as a 
consequence of the release.'' EDA makes these revisions to ensure 
clarity and to ensure consistency among different provisions of Sec.  
314.10.

Part 315--Trade Adjustment Assistance for Firms

    The Interim Final Rule substantially revised the Trade Adjustment 
Assistance for Firms (``TAA'') program provisions of EDA's former 
regulations. In the Interim Final Rule, part 315 was reorganized and 
simplified primarily by expanding the use of defined terms and by 
adding a new subpart D on Adjustment Proposals. This final rule adopts 
part 315 without substantive change except for amendments made to 
Sec. Sec.  315.5, 315.6, 315.7, 315.8 and 315.16.
    Among the new definitions in Sec.  315.2, the defined terms 
``Increase in Imports'' and ``Contributed Importantly'' describe two 
(2) of the most important concepts of the TAA program. In order for EDA 
to determine that a petitioning Firm demonstrates injury, the 
petitioning Firm must show that An Increase in Imports Contributed 
Importantly to its (i) decline in sales or production and (ii) loss of 
employment. EDA received two (2) comments suggesting that the defined 
term ``Increase in Imports'' is an ``outdated condition required to 
qualify domestic manufacturers for needed TAA.'' The commenters stated 
that ``when significant market-share has been captured by imports, 
there may not be an increase in imports because of general economic 
conditions whereby the demand for a particular product may decline.'' 
This final rule does not amend the definition of ``Increase in 
Imports'' because the definition tracks section 251(c) of the Trade Act 
(19 U.S.C. 2341) precisely and is intended to provide for more 
consistent application in injury determinations.
    The new term ``Decreased Absolutely'' imposes a five (5) percent 
minimum injury threshold requirement in the measurement of a Firm's 
decline in sales or production. EDA received approximately seven 
comments on this defined term which stated that the five (5) percent 
minimum injury threshold requirement will deny access to further 
qualified Firms, making it more difficult for them to qualify for the 
TAA program. This final rule does not amend the definition of 
``Decreased Absolutely.'' EDA has imposed this new threshold to (i) 
eliminate certification of Firms whose decline in sales or production 
is de minimis and, therefore, less certain to be attributable to an 
Increase in Imports, and (ii) help ensure that limited TAA program 
funds are provided to the most merit-worthy Firms facing difficult 
adjustment problems as a result of an Increase in Imports. Similarly, 
the definitions of ``Predecessor'' and ``Successor'' Firms set forth in 
the Interim Final Rule provide guidance for the circumstance where a 
petitioning Firm relies on the economic injury suffered by a corporate 
predecessor. These defined terms make clear that the Successor must 
have been in business less than two (2) years and must have purchased 
substantially all of the assets of the Predecessor.
    Section 315.5 consolidates into one section the scope of 
operations, selection, evaluation and award requirements of the Trade 
Adjustment Assistance Centers (``TAACs''), the non-profit and 
university-affiliated organizations that administer the TAA program 
nationwide through Cooperative Agreements with EDA. For consistency 
throughout the chapter, we amend the last sentence in Sec.  315.5(a)(1) 
by replacing the phrase ``annual FFO'' with ``applicable FFO.'' For 
improved understanding and formatting, this final rule also deletes the 
lead-in phrase in Sec.  315.5(b) and replaces the semicolon in Sec.  
315.5(b)(1) with a period. Additionally, we revise Sec.  315.5(b)(2) by 
making clear that EDA may invite new TAAC proposals through an FFO.
    Section 315.6 consolidates into one section the eligibility, 
evaluation and award requirements for Firms seeking Adjustment 
Assistance under the TAA program. This final rule amends the title of 
Sec.  315.6 to read as Firm eligibility for Adjustment Assistance, to 
more accurately reflect the section's contents, and removes the 
subtitles in paragraphs (a) through (c). Further, for clarity and 
conciseness, we replace the first sentence in Sec.  315.6(a)(3) with 
the sentence in Sec.  315.6(a)(4), and marginally revise the second 
sentence in Sec.  315.6(a)(3).
    Section 315.7 outlines the requirements for injury determinations 
based on a twelve-month (12) decline (Sec.  315.7(b)(1)), an interim 
sales or production decline (Sec.  315.7(b)(2)), or an interim 
employment decline (Sec.  315.7(b)(3)). This section makes clear that 
in order to be certified under any of these circumstances, a Firm must 
meet all of the requirements of the applicable subsection. We received 
approximately eight comments on Sec.  315.7(b), three of which 
expressed opposition to the applicable twelve-month (12) and six-month 
(6) periods of comparison outlined in Sec. Sec.  315.7(b)(1) and 
315.7(b)(3), and five of which expressed that the ``change to require 
six-month interim periods from the currently quarterly interim periods 
[in Sec.  315.7(b)(2)] will limit the number of

[[Page 56670]]

potentially eligible [F]irms to enter the program.'' EDA increased the 
injury periods for an interim sales or production decline and an 
interim employment decline to help ensure that limited TAA program 
funds are provided to the most merit-worthy Firms facing difficult 
adjustment problems as a result of an Increase in Imports into the 
United States. Section 315.7 as set forth in the Interim Final Rule 
adds consistency and integrity to these injury determination 
requirements by ensuring that (i) injury has occurred recently and (ii) 
injury is not due to seasonal fluctuations in sales, production or 
employment. This final rule amends the second sentence in Sec.  
315.7(a) by deleting the phrase ``all of'' and replacing the word 
``requirements'' with ``circumstances.''
    Section 315.8, titled Processing petitions for certification, 
generally tracks Sec.  315.10 of EDA's former regulations. This final 
rule amends this section to include a reference to Form ED-840P, which 
a petitioning Firm must complete and submit to EDA in order to apply 
for Adjustment Assistance. This final rule also replaces the lead-in 
sentence of Sec.  315.8(b) to include the new title of the form. 
Additionally, in response to comments received on this regulation, 
Sec.  315.8(b)(5) is revised to add the requirement that a petitioning 
Firm also must submit to EDA one (1) copy of a complete auditor's 
certified financial report for the entire period covering the petition, 
or if not available, one (1) copy of the complete profit and loss 
statements, balance sheets and supporting statements prepared by the 
Firm's accountants for the entire period covered by the petition. 
Public companies should submit copies of their most recent Form 10-K 
annual reports (or Form 10-Q quarterly reports, as appropriate) filed 
with the U.S. Securities and Exchange Commission for the entire period 
covered by the petition. This final rule also eliminates Sec.  
315.8(b)(6) and re-designates subsections (b)(7) and (b)(8) as (b)(6) 
and (b)(7), respectively. As requested, EDA is eliminating the 
requirement that Firms submit Federal income tax returns and State 
employment tax returns in order to reduce respondent burden in 
completing and submitting petitions (on Form ED-840P).
    Although the substantive provisions in Sec.  315.8 were not 
modified in the Interim Final Rule, one commenter raised a concern on 
the process prescribed in paragraphs (c) (relating to formal EDA 
acceptance of a petition for certification) and (g) (relating to the 
time of the determination after acceptance of a petition). The 
commenter contended that these paragraphs do not comport with the 
underlying statutory provision that requires EDA to make a 
determination about certification not later than 60 days after the date 
the petition is ``filed'' (see 19 U.S.C. Sec.  2341(d)). EDA believes 
the requirements of paragraphs (c) and (g) of this section (discussed 
below) are fully consistent with the statute. Moreover, these 
provisions have been in the EDA regulations without substantive change 
since 1995 (although the Interim Final Rule provides that EDA will send 
notice of a technically deficient petition to the sponsoring TAAC 
instead of to the petitioning firm). This final rule does not change 
either paragraph (c) or (g) of Sec.  315.8 from the version published 
in the Interim Final Rule.
    In evaluating petitions for determinations of certification under 
paragraphs (c) and (g) of Sec.  315.8 of the Interim Final Rule, EDA 
employs a two-stage process. First, EDA conducts a technical review 
based on the requirements set forth in paragraph (b) of Sec.  315.8 to 
determine if a petition has been properly filed and can be accepted for 
investigation. Second, EDA examines the ``accepted'' petition to 
determine whether the firm is eligible for program benefits based on 
the claims set forth in the petition. EDA works closely with the TAACs 
upon receipt of a petition and during the early stages of the petition 
evaluation process to ensure that eligible firms are not denied access 
to the TAA program due to technical defects in their petitions. The 
submission of accurate petitions also decreases the time it takes EDA 
to certify firm eligibility. EDA intends to work more closely with the 
TAACs to ensure that petitions submitted by firms through the TAACs 
meet technical petition filing requirements. For its part, EDA will 
endeavor to process accepted petitions in an expeditious manner and 
well in advance of the 60-day review period required by the statute and 
by paragraph (g) of Sec.  315.8 of the Interim Final Rule.
    The commenter also recommended that EDA drop the new regulations 
and look for ways to streamline the certification process. For the 
reasons noted above, EDA believes it has streamlined significant 
aspects of the certification process in response to comments. Moreover, 
in addition to these new regulations, EDA has placed into service a new 
petition for certification that streamlines the petition process. This 
final rule includes those provisions necessary to enable EDA to 
demonstrate it is administering the Trade Adjustment Assistance Program 
in a manner consistent with the requirements of law.
    Section 315.9, titled Hearings, and Sec.  315.11, titled Appeals, 
final determinations and termination of certification, divide Sec.  
315.11 of EDA's former regulations to address separately these distinct 
topics. As set forth in the Interim Final Rule, subpart C, titled 
Protective Provisions, contains standard provisions consistent with the 
Trade Act and EDA policy on recordkeeping (Sec.  315.12), audit and 
examination (Sec.  315.13), certifications (Sec.  315.14) and conflicts 
of interest (Sec.  315.15).
    Subpart D, titled Adjustment Proposals, presents provisions 
reflecting long-standing practices of EDA and the TAACs in evaluating 
Adjustment Proposals. This final rule changes the title of Sec.  315.16 
to Adjustment Proposal Requirements and removes the word ``process'' in 
the lead-in statement. To clarify the appropriate uses of TAA program 
funds, this final rule also adds a new subsection (d) to Sec.  315.16 
to read as follows: ``The Adjustment Assistance identified in the 
Adjustment Proposal must consist of specialized consulting services 
designed to assist the Firm in becoming more competitive in the global 
marketplace. For this purpose, Adjustment Assistance generally consists 
of knowledge-based services such as market penetration studies, 
customized business improvements, and designs for new products. 
Adjustment Assistance does not include expenditures for capital 
improvements or for the purchase of business machinery or supplies.''
    Finally, subpart E, titled Assistance to Industries, is effectively 
unchanged from EDA's former regulations, tracking the current statutory 
provisions of the Trade Act.

Classification

    Prior notice and opportunity for public comment are not required 
for rules concerning public property, loans, grants, benefits, and 
contracts (5 U.S.C. 553(a)(2)). Because prior notice and an opportunity 
for public comment are not required pursuant to 5 U.S.C. 553, or any 
other law, the analytical requirements of the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.) are inapplicable. Therefore, a regulatory 
flexibility analysis has not been prepared.

Executive Order No. 12866

    It has been determined that this final rule is significant for 
purposes of Executive Order 12866.

[[Page 56671]]

Congressional Review Act

    This final rule is not major under the Congressional Review Act (5 
U.S.C. 801 et seq.)

Executive Order No. 13132

    Executive Order 13132 requires agencies to develop an accountable 
process to ensure ``meaningful and timely input by State and local 
officials in the development of regulatory policies that have 
federalism implications.'' ``Policies that have federalism 
implications'' is defined in Executive Order 13132 to include 
regulations that have ``substantial direct effects on the States, on 
the relationship between the national government and the States, or on 
the distribution of power and responsibilities among the various levels 
of government.'' It has been determined that this final rule does not 
contain policies that have federalism implications.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) 
(``PRA'') requires that a Federal agency consider the impact of 
paperwork and other information collection burdens imposed on the 
public and, under the provisions of PRA section 3507(d), obtain 
approval from OMB for each collection of information it conducts, 
sponsors, or requires through regulations. Notwithstanding any other 
provision of law, no person is required to respond to, nor shall any 
person be subject to a penalty for failure to comply with a collection 
of information subject to the PRA unless that collection displays a 
currently valid OMB Control Number.
    The following table provides a complete list of the collections of 
information (and corresponding OMB Control Numbers) set forth in this 
final rule. These collections of information are necessary for the 
proper performance and functions of EDA. Subsequent to the August 11, 
2005 publication of the Interim Final Rule (as amended by the December 
15, 2005 Rulemaking), EDA undertook an extensive review of its 
collections of information, and thereby changed the title of four (4) 
of its collections of information and consolidated three (3) 
collections of information into existing information collections.

------------------------------------------------------------------------
   Part or section of this                             Form/title/OMB
         final rule             Nature of request      Control Number
------------------------------------------------------------------------
301.2; 301.10...............  With an application   ED-900A, Application
                               for Investment        for Investment
                               Assistance, a non-    Assistance (0610-
                               profit Eligible       0094).
                               Applicant must
                               include a
                               resolution passed
                               by an authorized
                               representative of a
                               political
                               subdivision of a
                               State.
301.3(a); 301.10;             An Eligible           ED-900P, Pre-
 305.3(a)(1).                  Applicant must        Application for
                               substantiate          Investment
                               Regional              Assistance (0610-
                               eligibility and       0094).
                               justify the
                               requested EDA
                               Investment
                               Assistance based
                               on, for example,
                               the unemployment
                               rate, per capita
                               income levels, or a
                               Special Need (as
                               determined by EDA)
                               in the Region in
                               which the Project
                               will be located.
                               The Eligible
                               Applicant also must
                               identify and submit
                               to EDA the source
                               of data used to
                               substantiate
                               Regional
                               eligibility (e.g.,
                               ACS data, other
                               Federal data for
                               the Region in which
                               the Project will be
                               located, or data
                               available through
                               the State
                               government).
301.4(b)(1)(i); 305.3(a)(1).  An Eligible           ED-900P, Pre-
                               Applicant must        Application for
                               provide information   Investment
                               on the severity of    Assistance (0610-
                               the Region's          0094).
                               unemployment and
                               its duration, the
                               per capita income
                               levels and extent
                               of the Region's
                               unemployment or
                               outmigration.
301.4(b)(4).................  An Eligible           ED-900P, Pre-
                               Applicant for a       Application for
                               Project under part    Investment
                               306 must provide      Assistance (0610-
                               information to show   0094).
                               that the Project
                               merits an increase
                               to the Investment
                               Rate because of the
                               Project's
                               infeasibility
                               without such an
                               increase, or
                               because the Project
                               will be of no or
                               only incidental
                               benefit to the
                               Eligible Applicant.
301.5; 301.10...............  An Eligible           ED-900A, Application
                               Applicant must        for Investment
                               provide information   Assistance (0610-
                               to show that          0094).
                               Matching Share
                               funds will be
                               available for the
                               Project.
301.7.......................  An Eligible           ED-900P, Pre-
                               Applicant must        Application for
                               submit an             Investment
                               Investment proposal   Assistance (0610-
                               on EDA's pre-         0094).
                               application (on
                               Form ED-900P or any
                               successor form).
301.7(a)(1); 301.10(a) and    For Projects          ED-900A, Application
 (b).                          selected from         for Investment
                               successful pre-       Assistance (0610-
                               applications, EDA     0094).
                               will invite those
                               Eligible Applicants
                               to submit formal
                               applications for
                               Investment
                               Assistance (on Form
                               ED-900A or any
                               successor form).
301.10(b)(3)................  An Eligible           ED-900A, Application
                               Applicant for a       for Investment
                               construction          Assistance (0610-
                               Project under parts   0094).
                               305 or 307 must
                               include with its
                               application for
                               Investment
                               Assistance a CEDS
                               acceptable to EDA
                               (pursuant to part
                               303) or otherwise
                               incorporate by
                               reference a current
                               CEDS that EDA
                               approves for the
                               proposed Project.
302.7(a)....................  Recipients must       Award Amendment
                               submit requests for   Request (0610-
                               amendments to         0102).
                               Investment awards
                               in writing to EDA
                               for approval and
                               provide information
                               and documentation
                               as EDA deems
                               necessary.
302.9(a)....................  An Eligible           ED-900A, Application
                               Applicant must        for Investment
                               furnish comments on   Assistance (0610-
                               the Project from      0094).
                               the relevant
                               governmental
                               authority in the
                               Region or proof of
                               efforts to obtain
                               comments if none
                               were provided by
                               the governmental
                               authority.

[[Page 56672]]

 
302.10(b)(1)................  An Eligible           ED-900A, Application
                               Applicant must        for Investment
                               certify to EDA the    Assistance (0610-
                               names of any          0094).
                               persons engaged by
                               or on behalf of the
                               Eligible Applicant
                               for the purpose of
                               expediting
                               Investment
                               Assistance
                               applications made
                               to EDA.
302.14(a)...................  Recipients shall      Audits of States,
                               keep records of the   Local Governments,
                               amount and            and Non-Profit
                               disposition of        Organizations, OMB
                               awards of             Circular A-133.
                               Investment
                               Assistance, the
                               total cost of the
                               Project, the amount
                               and nature of the
                               portion of the
                               Project costs
                               provided by other
                               sources and other
                               records that would
                               facilitate an
                               effective audit.
302.15......................  An Eligible           ED-900P, Pre-
                               Applicant must        Application for
                               certify (and submit   Investment
                               evidence thereof      Assistance (0610-
                               satisfactory to       0094).
                               EDA) that it meets
                               the requirements
                               for receiving
                               Investment
                               Assistance.
302.16(b)...................  Recipients are        Government
                               required to submit    Performance and
                               reports consisting    Results Act
                               of data-specific      (``GPRA'')
                               evaluations of the    Performance
                               Project's             Validation Forms
                               effectiveness.        (0610-0098).
302.16(c)...................  EDA may require a     Project Service Map
                               Recipient to          (0610-0102).
                               provide a ``Project
                               service map'' and
                               other information
                               in order to
                               determine which
                               segments of the
                               Region are being
                               assisted with the
                               Investment
                               Assistance.
302.20(d)...................  Recipients and Other  ED-900A, Application
                               Parties must submit   for Investment
                               written assurances    Assistance (0610-
                               to EDA that they      0094).
                               will comply with
                               anti-discriminatory
                               laws and
                               regulations.
303.9(c)....................  Eligible Applicants   GPRA Performance
                               for short-term        Validation Forms
                               Planning Investment   (0610-0098).
                               Assistance must
                               provide performance
                               measures acceptable
                               to EDA, and provide
                               EDA with progress
                               reports during the
                               term of the
                               Planning Investment.
304.1; 304.4(a).............  To have a Region      Comprehensive
                               certified as an       Economic
                               EDD, a District       Development
                               Organization must     Strategies and
                               submit information    Planning
                               showing that the      Investments (0610-
                               Region contains at    0093).
                               least one area
                               subject to the
                               relevant economic
                               distress criteria,
                               is able to foster
                               development on a
                               larger scale than
                               in a single area,
                               has an EDA-approved
                               CEDS and obtains
                               commitments from a
                               majority of the
                               relevant counties
                               and States.
304.2(c)(2); 304.4(b).......  The District          ED-900A, Application
                               Organization must     for Investment
                               demonstrate that      Assistance (0610-
                               its governing body    0094);
                               is broadly            Comprehensive
                               representative of     Economic
                               the principal         Development
                               economic interests    Strategies and
                               of the Region.        Planning
                                                     Investments (0610-
                                                     0093).
304.2(c)(4).................  The District          Comprehensive
                               Organization must     Economic
                               notify the public     Development
                               of its annual         Strategies and
                               meetings, its         Planning
                               decisions, the        Investments (0610-
                               results of            0093).
                               programs, and as
                               reasonably
                               requested, the
                               results of audited
                               statements, annual
                               budgets, and
                               minutes of public
                               meetings.
305.2(b); 305.3(a)(3).......  An Eligible           ED-900A, Application
                               Applicant must show   for Investment
                               that the Public       Assistance (0610-
                               Works Project will    0094); Construction
                               promote: the growth   Investments (0610-
                               of industrial or      0096).
                               commercial plants,
                               the creation of
                               long-term
                               employment
                               opportunities
                               primarily for low-
                               income families,
                               and the fulfillment
                               of the Region's
                               pressing needs.
305.4(c)....................  In order to receive   ED-900A, Application
                               any portion of the    for Investment
                               Investment            Assistance (0610-
                               Assistance for        0094); Construction
                               design and            Investments (0610-
                               engineering work,     0096).
                               an Eligible
                               Applicant must
                               submit and certify
                               information that
                               documents
                               compliance with the
                               Investment awards
                               of all design and
                               engineering
                               contracts.
305.5.......................  In order to allow a   ED-900A, Application
                               District              for Investment
                               Organization to       Assistance (0610-
                               administer the        0094); Construction
                               Project for another   Investments (0610-
                               Recipient, the        0096).
                               Recipient must make
                               this request and
                               submit information
                               to EDA showing that
                               the Recipient does
                               not have the
                               current staff
                               capacity to
                               administer the
                               project, the
                               District
                               Organization would
                               be more effective
                               than another local
                               business or
                               organization, the
                               District
                               Organization would
                               not subcontract the
                               work, and the costs
                               of District
                               Organization
                               administration will
                               not exceed the
                               allowable costs
                               were the Recipient
                               administering it.
305.6.......................  A Recipient may use   ED-900A, Application
                               an alternate          for Investment
                               construction          Assistance (0610-
                               procurement method    0094); Construction
                               to the traditional    Investments (0610-
                               design/bid/build.     0096).
                               If an alternate
                               method is used, the
                               Recipient must
                               submit to EDA for
                               approval a
                               construction
                               services
                               procurement plan
                               and the Recipient
                               must use a design
                               professional to
                               oversee the process.

[[Page 56673]]

 
305.7.......................  The Recipient may     ED-900A, Application
                               use ``in-house        for Investment
                               forces'' for          Assistance (0610-
                               design,               0094); Construction
                               construction,         Investments (0610-
                               inspection, legal     0096).
                               services or other
                               work on the Project
                               if it submits a
                               sufficient
                               justification to
                               EDA.
305.8(a); 305.8(b)..........  Recipients of EDA     ED-900A. Application
                               construction awards   for Investment
                               must obtain prior     Assistance (0610-
                               approval for the      0094); Construction
                               use of furnished      Investments (0610-
                               equipment and         0096).
                               materials. Requests
                               must show that
                               costs claimed for
                               furnished equipment
                               and materials are
                               competitive with
                               local market costs
                               for similar
                               equipment and
                               materials.
305.9.......................  An EDA construction   ED-900A, Application
                               award Recipient       for Investment
                               must submit           Assistance (0610-
                               information to EDA    0094); Construction
                               regarding why         Investments (0610-
                               phasing is            0096).
                               necessary, a
                               description of the
                               phasing, related
                               costs and
                               schedules, and
                               certification that
                               the Recipient will
                               pay for overruns
                               and that it is
                               capable of paying
                               for incurred costs
                               before the first
                               disbursement.
305.10......................  If at the             Construction
                               construction          Investments (0610-
                               contract bid          0096).
                               opening, the lowest
                               responsive bid is
                               less than total
                               Project cost, the
                               Recipient will
                               notify EDA to
                               determine whether
                               Investment funds
                               should be
                               deobligated from
                               the Project.
305.11......................  Recipients may issue  Construction
                               a notice permitting   Investments (0610-
                               construction under    0096).
                               contract to
                               commence prior to
                               an EDA
                               determination of
                               award compliance
                               and eligibility for
                               cost reimbursement,
                               but will proceed at
                               their own risk
                               until EDA review
                               and concurrence.
                               The EDA regional
                               office may request
                               information from
                               the Recipient to
                               make a
                               determination of
                               award compliance.
305.12......................  EDA requires a        Construction
                               Recipient to erect    Investments (0610-
                               a project sign or     0096).
                               signs at the
                               Project
                               construction site
                               to indicate that
                               the Federal
                               government is
                               participating in
                               the Project. The
                               regional office
                               will provide
                               mandatory
                               specifications for
                               Project signage.
305.13......................  Recipients involved   Construction
                               in a contract         Investments (0610-
                               change order must     0096).
                               submit them to EDA
                               for review.
306.2.......................  EDA selects Projects  ED-900P, Pre-
                               for Local and         Application for
                               National Technical    Investment
                               Assistance based on   Assistance (0610-
                               the criteria in       0094).
                               part 301 and the
                               extent to which the
                               Eligible Applicant
                               demonstrates that
                               the Project will
                               achieve more
                               specific objectives
                               in the Region (as
                               set forth in Sec.
                               306.2) and meets
                               the criteria in the
                               applicable FFO.
306.5.......................  EDA provides          ED-900P, Pre-
                               Investment            Application for
                               Assistance to         Investment
                               University Center     Assistance (0610-
                               Projects based on     0094).
                               the selection
                               criteria in part
                               301, the
                               competitive
                               selection process
                               outlined in the
                               applicable FFO, and
                               the extent to which
                               the Eligible
                               Applicant
                               demonstrates other
                               more specific,
                               related criteria.
307.5(a)....................  Each application for  ED-900A, Application
                               Economic Adjustment   for Investment
                               Assistance must       Assistance (0610-
                               include or            0094).
                               incorporate by
                               reference (if so
                               approved by EDA) a
                               CEDS.
307.9.......................  All RLF Recipients    RLF Standard Terms
                               must submit to EDA    and Conditions
                               an RLF Plan.          (0610-0095).
307.11(a)...................  Prior to the          RLF Standard Terms
                               disbursement of EDA   and Conditions
                               funds, RLF            (0610-0095).
                               Recipients must
                               provide in a form
                               acceptable to EDA
                               evidence of
                               fidelity bond
                               coverage and
                               evidence of
                               certification in
                               accordance with
                               Sec.   307.15(b)(1).
307.11(e)...................  If the Recipient      RLF Standard Terms
                               receives Grant        and Conditions
                               funds and the RLF     (0610-0095).
                               loan disbursement
                               is subsequently
                               delayed beyond 30
                               days, the Recipient
                               must notify the
                               applicable grants
                               officer and return
                               such non-disbursed
                               funds to EDA.
307.12(a)(4)................  RLF Recipients must   ED-209I, Income and
                               complete an RLF       Expense Statement
                               Income and Expense    (0610-0095).
                               Statement.
307.13(a)...................  RLF Recipients must   RLF Standard Terms
                               maintain Closed       and Conditions
                               Loan files and all    (0610-0095).
                               related documents,
                               books of account,
                               computer data files
                               and other records
                               over the term of
                               the Closed Loan and
                               for a three-year
                               period from the
                               date of final
                               disposition of such
                               Closed Loan.
307.13(b)...................  RLF Recipients must   RLF Standard Terms
                               maintain adequate     and Conditions
                               accounting records    (0610-0095).
                               to substantiate the
                               amount of RLF
                               Income expended for
                               eligible
                               administrative
                               costs and retain
                               records of
                               administrative
                               expenses incurred
                               for activities and
                               equipment relating
                               to the operation of
                               the RLF.

[[Page 56674]]

 
307.14(a)...................  All RLF Recipients    ED-209S, Semi-Annual
                               must submit semi-     Report (0610-0095).
                               annual reports to
                               EDA.
307.14(a)...................  EDA may approve the   ED-209A, Annual
                               substitution of       Report (0610-0095).
                               annual reports for
                               semi-annual reports
                               upon written
                               request by the RLF
                               Recipient if the
                               conditions set
                               forth in Sec.
                               307.14(a)(1)-(4)
                               are met.
307.14(b)...................  All Recipients must   ED-209S, Semi-Annual
                               certify as part of    Report (0610-0095).
                               the semi-annual or    ED-209A, Annual
                               annual report that    Report (0610-0095).
                               the RLF is
                               operating in
                               accordance with the
                               RLF Plan, and
                               describe any
                               modifications to
                               the RLF Plan to
                               ensure effective
                               use of the RLF.
307.14(c)...................  An RLF Recipient      ED-209I, Income and
                               using either fifty    Expense Statement
                               percent or more (or   (0610-0095).
                               more than $100,000)
                               of RLF Income for
                               administrative
                               costs in a 12-month
                               reporting period
                               must submit a
                               completed Income
                               and Expense
                               Statement annually
                               to the appropriate
                               EDA regional office.
307.15(b)(1)................  Within sixty (60)     RLF Standard Terms
                               days prior to the     and Conditions
                               initial               (0610-0095).
                               disbursement of EDA
                               funds, an
                               independent
                               accountant familiar
                               with the
                               Recipient's
                               accounting system
                               shall certify to
                               EDA and the
                               Recipient that such
                               system is adequate
                               to identify,
                               safeguard and
                               account for all RLF
                               operations.
307.15(b)(2)................  Prior to the          RLF Standard Terms
                               disbursement of any   and Conditions
                               EDA funds, an RLF     (0610-0095).
                               Recipient must
                               certify that
                               standard loan
                               documents necessary
                               for lending are in
                               place and that
                               these documents
                               have been reviewed
                               by its legal
                               counsel for
                               adequacy and
                               compliance with the
                               terms and
                               conditions of the
                               Grant and
                               applicable State
                               and local law.
307.16(b)...................  Recipients must       RLF Standard Terms
                               promptly notify EDA   and Conditions
                               in writing of any     (0610-0095).
                               condition that may
                               adversely affect
                               their ability to
                               meet prescribed
                               schedule deadlines.
                               Recipients must
                               submit a written
                               request for
                               continued use of
                               Grant funds beyond
                               a missed deadline
                               for disbursement of
                               RLF funds.
307.17(e)...................  After the full        RLF Standard Terms
                               disbursement of       and Conditions
                               Grant funds, RLF      (0610-0095)
                               Capital may be used
                               to guarantee loans
                               of private lenders,
                               provided the
                               Recipient has
                               obtained prior
                               written approval
                               from EDA of its
                               proposed loan
                               activities and
                               submitted to EDA
                               the three listed
                               items. The
                               Recipient must also
                               amend its RLF Plan
                               to accommodate any
                               EDA-approved loan
                               guaranty activities.
307.19......................  With prior approval   RLF Standard Terms
                               from EDA, a           and Conditions
                               Recipient may enter   (0610-0095).
                               into a Sale or
                               Securitization of
                               all or a portion of
                               its RLF loan
                               portfolio.
307.21(b)...................  EDA may approve a     RLF Standard Terms
                               request from a        and Conditions
                               Recipient to          (0610-0095).
                               terminate an RLF
                               Grant.
part 310....................  Upon the application  Comprehensive
                               of an Eligible        Economic
                               Applicant, EDA may    Development
                               designate the         Strategies and
                               Region which the      Planning
                               Project will serve    Investments (0610-
                               as a Special Impact   0093).
                               Area and waive the
                               CEDS requirement if
                               the Eligible
                               Applicant
                               demonstrates that
                               its proposed
                               Project will
                               directly fulfill a
                               pressing need and
                               assist in
                               preventing
                               excessive
                               unemployment.
314.3(f)....................  With EDA's prior      Property Management
                               written approval, a   0610-0103.
                               Recipient may
                               undertake an
                               incidental use of
                               Property that does
                               not interfere with
                               the scope of the
                               Project or the
                               economic purpose
                               for which the
                               Investment was
                               made, provided it
                               satisfies the
                               conditions set
                               forth in Sec.
                               314.3(f).
314.6(b)....................  In order to use EDA-  ED-900A, Application
                               funded property to    for Investment
                               secure a mortgage     Assistance (0610-
                               or deed of trust or   0094); Construction
                               encumber the          Investments (0610-
                               property, the         0096).
                               Recipient must
                               provide information
                               that satisfies one
                               or more of the
                               exceptions set
                               forth in Sec.
                               314.6(b).
314.7(a) and (c)............  The Recipient must    ED-900A, Application
                               provide information   for Investment
                               that satisfies EDA    Assistance (0610-
                               that the Recipient    0094); Construction
                               has title to the      Investments (0610-
                               Real Property and     0096).
                               all easements,
                               rights-of-way,
                               permits or long-
                               term leases, unless
                               it can provide
                               information proving
                               it meets an
                               exception to the
                               rule.
314.7(b)....................  The Recipient must    ED-900A, Application
                               provide information   for Investment
                               regarding all         Assistance (0610-
                               encumbrances on the   0094); Construction
                               Real Property to      Investments (0610-
                               EDA.                  0096).

[[Page 56675]]

 
314.8.......................  Recipients must       ED-900A, Application
                               execute a lien,       for Investment
                               covenant or other     Assistance (0610-
                               statement of EDA's    0094); Construction
                               interest in all       Investments (0610-
                               Property acquired     0096).
                               or improved with
                               EDA Investment
                               Assistance and
                               record it in the
                               proper jurisdiction.
314.9.......................  Recipients must       ED-900A, Application
                               execute a security    for Investment
                               interest or other     Assistance (0610-
                               statement of EDA's    0094); Construction
                               interest in           Investments (0610-
                               Personal Property     0096).
                               acquired or
                               improved by EDA
                               funds and record
                               the interest in
                               accordance with
                               applicable law.
314.10......................  If a Recipient        0610-0103.
                               wishes for EDA to
                               release its Real
                               Property or
                               tangible Personal
                               Property interest
                               before the
                               expiration of the
                               Property's
                               Estimated Useful
                               Life, it must
                               submit a request to
                               EDA and either file
                               a covenant of use
                               precluding
                               inherently
                               religious
                               activities or
                               purchase EDA's
                               Federal Share in
                               such Property.
315.5(b)....................  Current or            ED-900A, Application
                               prospective TAACs     for Investment
                               must submit either    Assistance (0610-
                               a new or amended      0094).
                               application to EDA,
                               along with a
                               proposed budget,
                               narrative scope of
                               work and other
                               information as may
                               be requested by EDA.
315.5(c)....................  TAACs must submit     GPRA Performance
                               information           Validation Form
                               regarding             (0610-0098).
                               performance to be
                               evaluated by EDA.
315.6(a)(1); 315.7; 315.8...  Firms must provide    ED-840P, Petition by
                               specific              a Firm for
                               information to EDA    Certification of
                               in order to be        Eligibility to
                               certified for         Apply for Trade
                               participation in      Adjustment
                               the TAA program.      Assistance (0610-
                                                     0091).
315.6(a)(2); 315.6(a)(3);     A Certified Firm      ED-840P, Petition by
 315.16.                       must submit an        a Firm for
                               Adjustment Proposal   Certification of
                               to EDA for            Eligibility to
                               approval. If EDA      Apply for Trade
                               approves the          Adjustment
                               Adjustment            Assistance (0610-
                               Proposal, the Firm    0091).
                               may then request
                               Adjustment
                               Assistance from the
                               TAAC.
315.9.......................  In order to have a    ED-840P, Petition by
                               public hearing, a     a Firm for
                               Person with a         Certification of
                               Substantial           Eligibility to
                               Interest in an        Apply for Trade
                               accepted petition     Adjustment
                               for TAA               Assistance (0610-
                               certification must    0091).
                               submit a request
                               that follows this
                               section's
                               procedures.
315.12......................  Each TAAC shall keep  GPRA Performance
                               records disclosing    Validation Form
                               the use of all TAA    (0610-0098).
                               funds.
------------------------------------------------------------------------

List of Subjects

13 CFR Part 300

    Financial assistance, Distressed region, Headquarters, Regional 
offices.

13 CFR Part 301

    Eligibility requirements, Applicant requirements, Economic distress 
levels, Investment rates, Match share requirements, Application 
requirements, Proposal selection.

13 CFR Part 302

    Environmental review, Federal policy and procedures, Inter-
governmental review, Fees, Pre-approval requirements, Project 
administration, Reporting and audit requirements, Conflicts of 
interest, Post-approval requirements, Civil rights.

13 CFR Part 303

    Planning, Award and application requirements, Comprehensive 
economic development strategy, State plans, Short-term planning 
investments.

13 CFR Part 304

    Economic development district, Organizational requirements, 
District modification and termination, Performance evaluations.

13 CFR Part 305

    Public works, Economic development, Award and application 
requirements, Requirements for approved projects.

13 CFR Part 306

    Training, Research, Technical assistance, Award and application 
requirements, University centers, Performance evaluations.

13 CFR Part 307

    Economic adjustment assistance, Award and application requirements, 
Revolving loan fund, Pre-loan requirements, Merger, Income, Record and 
reporting requirements, Sales and securitizations, Liquidation, 
Termination.

13 CFR Part 308

    Performance awards, Planning performance awards.

13 CFR Part 309

    Redistribution requirements, Investment assistance.

13 CFR Part 310

    Special impact area, Excessive unemployment, Special need.

13 CFR Part 311

    [Reserved]

13 CFR Part 312

    [Reserved]

13 CFR Part 313

    [Reserved]

13 CFR Part 314

    Federal interest, Authorized use, Property, Federal share, Title, 
Release, Property interest.

13 CFR Part 315

    Administrative practice and procedure, Trade adjustment assistance, 
Eligible petitioner, Firm selection, Certification requirements, 
Recordkeeping and audit requirements, Adjustment proposals.

Regulatory Text

0
For reasons discussed above, 13 CFR chapter III is revised to read as 
follows:

13 CFR CHAPTER III

Economic Development Administration, Department of Commerce

Part

300 General Information
301 Eligibility, Investment Rate and Proposal and Application 
Requirements
302 General Terms and Conditions for Investment Assistance

[[Page 56676]]

303 Planning Investments and Comprehensive Economic Development 
Strategies
304 Economic Development Districts
305 Public Works and Economic Development Investments
306 Training, Research and Technical Assistance Investments
307 Economic Adjustment Assistance Investments
308 Performance Incentives
309 Redistributions of Investment Assistance
310 Special Impact Areas
311 [Reserved]
312 [Reserved]
313 [Reserved]
314 Property
315 Trade Adjustment Assistance for Firms

PART 300--GENERAL INFORMATION

Sec.
300.1 Introduction and mission.
300.2 EDA Headquarters and regional offices.
300.3 Definitions.

    Authority: 42 U.S.C. 3121; 42 U.S.C. 3122; 42 U.S.C. 3211; 
Department of Commerce Organization Order 10-4.


Sec.  300.1  Introduction and mission.

    EDA was created by Congress pursuant to the Public Works and 
Economic Development Act of 1965 to provide financial assistance to 
both rural and urban distressed communities. EDA's mission is to lead 
the Federal economic development agenda by promoting innovation and 
competitiveness, preparing American regions for growth and success in 
the worldwide economy. EDA will fulfill its mission by fostering 
entrepreneurship, innovation and productivity through Investments in 
infrastructure development, capacity building and business development 
in order to attract private capital investments and higher-skill, 
higher-wage jobs to Regions experiencing substantial and persistent 
economic distress. EDA works in partnership with distressed Regions to 
address problems associated with long-term economic distress as well as 
to assist those Regions experiencing sudden and severe economic 
dislocations, such as those resulting from natural disasters, 
conversions of military installations, changing trade patterns and the 
depletion of natural resources. EDA Investments generally take the form 
of Grants to or Cooperative Agreements with Eligible Recipients.


Sec.  300.2  EDA Headquarters and regional offices.

    (a) EDA's Headquarters Office is located at: U.S. Department of 
Commerce, Economic Development Administration, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230.
    (b) EDA has regional offices throughout the United States and each 
regional office's contact information may be found on EDA's Internet 
Web site at http://www.eda.gov or in the notice of Federal Funding 
Opportunity published annually by EDA. Please contact the appropriate 
regional office to learn about EDA Investment opportunities in your 
Region.


Sec.  300.3  Definitions.

    As used in this chapter, the following terms shall have the 
following meanings:
    Assistant Secretary means the Assistant Secretary for Economic 
Development within the Department.
    Comprehensive Economic Development Strategy or CEDS means a 
strategy that meets the requirements of Sec.  303.7 of this chapter.
    Cooperative Agreement means the financial assistance award of EDA 
funds to an Eligible Recipient under PWEDA, where substantial 
involvement is expected between EDA and the Eligible Recipient in 
carrying out the activities contemplated in an agreement between the 
parties. See 31 U.S.C. 6305.
    Department means the U.S. Department of Commerce.
    District Organization means an organization meeting the 
requirements of Sec.  304.2 of this chapter.
    Economic Development District or District or EDD means any Region 
in the United States designated by EDA as an Economic Development 
District under Sec.  304.1 of this chapter (or such regulation as was 
previously in effect before the effective date of this section) and 
also includes any economic development district designated as such 
under section 403 of PWEDA, as in effect on February 10, 1999.
    EDA means the Economic Development Administration within the 
Department.
    Eligible Applicant means an entity qualified to be an Eligible 
Recipient or its authorized representative.
    Eligible Recipient means any of the following:
    (1) City or other political subdivision of a State, including a 
special purpose unit of State or local government engaged in economic 
or infrastructure development activities, or a consortium of political 
subdivisions;
    (2) State;
    (3) Institution of higher education or a consortium of institutions 
of higher education;
    (4) Public or private non-profit organization or association, 
including a community or faith-based non-profit organization, acting in 
cooperation with officials of a political subdivision of a State;
    (5) District Organization;
    (6) Indian Tribe or a consortium of Indian Tribes; or
    (7) Private individual or for-profit organization, but only for 
Training, Research and Technical Assistance Investments under part 306 
of this chapter.
    Federal Agency means a department, agency or instrumentality of the 
United States government.
    Federal Funding Opportunity or FFO means the notice EDA publishes 
annually at http://www.grants.gov and on EDA's Internet Web site at 
http://www.eda.gov that describes the amounts, particular application 
procedures, funding priorities, special circumstances and other 
relevant information concerning EDA's Investment programs for the year. 
EDA may also periodically publish FFOs on specific programs or 
initiatives.
    Federally-Declared Disaster means a Presidentially-Declared 
Disaster, a fisheries resource disaster pursuant to section 312(a) of 
the Magnuson-Stevens Fishery Conservation and Management Act, as 
amended (16 U.S.C. 1861a(a)), or other federally-declared disasters 
pursuant to applicable law.
    Grant means the financial assistance award of EDA funds to an 
Eligible Recipient under PWEDA, where the Eligible Recipient bears 
responsibility for carrying out the activities contemplated in an 
agreement between the parties. See 31 U.S.C. 6304.
    Immediate Family means a person's spouse, parents, grandparents, 
siblings, children and grandchildren, but does not include distant 
relatives, such as cousins, unless the distant relative lives in the 
same household as the person.
    In-Kind Contribution(s) means non-cash contributions, which may 
include contributions of space, equipment, services and assumptions of 
debt that are fairly evaluated by EDA and that satisfy applicable 
Federal cost principles and the requirements of 15 CFR parts 14 or 24, 
as applicable.
    Indian Tribe means any Indian tribe, band, nation, pueblo, or other 
organized group or community, including any Alaska Native Village or 
Regional Corporation as defined in or established under the Alaska 
Native Claims Settlement Act, as amended (43 U.S.C. 1601 et seq.), that 
is recognized as eligible for the special programs and services 
provided by the United States to Indians because of their status as 
Indians. This term includes the governing body of an Indian tribe, non-
profit Indian corporation (restricted to

[[Page 56677]]

Indians), Indian authority, or other non-profit Indian tribal 
organization or entity; provided that the Indian tribal organization or 
entity is wholly owned by, and established for the benefit of, the 
Indian tribe or Alaska Native Village.
    Interested Party means any officer, employee or member of the board 
of directors or other governing board of the Recipient, including any 
other parties that advise, approve, recommend or otherwise participate 
in the business decisions of the Recipient, such as agents, advisors, 
consultants, attorneys, accountants or shareholders. An Interested 
Party also includes the Interested Party's Immediate Family and other 
persons directly connected to the Interested Party by law or through a 
business arrangement.
    Investment or Investment Assistance means an EDA Grant or 
Cooperative Agreement entered into by EDA and a Recipient.
    Investment Rate means, as set forth in Sec.  301.4 of this chapter, 
the amount of the EDA Investment in a particular Project expressed as a 
percentage of the total Project costs.
    Local Share or Matching Share means the non-EDA funds and any In-
Kind Contributions that are approved by EDA and provided by Recipients 
or third parties as a condition of an Investment. The Matching Share 
may include funds from other Federal Agencies only if authorized by 
statute that allows such use, which may be determined by EDA's 
reasonable interpretation of such authority.
    Presidentially-Declared Disaster means a major disaster or 
emergency declared under the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act, as amended (42 U.S.C. 5121 et seq.).
    Private Sector Representative means, with respect to any for-profit 
enterprise, any senior management official or executive holding a key 
decision-making position, or that person's designee.
    Project means the proposed or authorized activity (or activities) 
the purpose of which fulfills EDA's mission and program requirements as 
set forth in PWEDA and this chapter and which may be funded in whole or 
in part by EDA Investment Assistance.
    PWEDA means the Public Works and Economic Development Act of 1965, 
as amended (42 U.S.C. 3121 et seq.), including the comprehensive 
amendments made by the Economic Development Administration 
Reauthorization Act of 2004 (Pub. L. 108-373, 118 Stat. 1756).
    Recipient means an entity receiving EDA Investment Assistance, 
including any EDA-approved successor to the entity.
    Region or Regional means an economic unit of human, natural, 
technological, capital or other resources, defined geographically. 
Geographic areas comprising a Region need not be contiguous or defined 
by political boundaries, but should constitute a cohesive area capable 
of undertaking self-sustained economic development. For the limited 
purposes of determining economic distress levels and Investment Rates 
pursuant to part 301 of this chapter, a Region may also comprise a 
specific geographic area defined solely by its level of economic 
distress, as set forth in Sec. Sec.  301.3(a)(2) and 301.3(a)(3) of 
this chapter.
    Regional Commission means any of the following:
    (1) The Appalachian Regional Commission established under chapter 
143 of title 40, United States Code;
    (2) The Delta Regional Authority established under subtitle F of 
the Consolidated Farm and Rural Development Act (7 U.S.C. 2009aa et 
seq.);
    (3) The Denali Commission established under the Denali Commission 
Act of 1998 (42 U.S.C. 3121 note; 112 Stat. 2681-637 et seq.); or
    (4) The Northern Great Plains Regional Authority established under 
subtitle G of the Consolidated Farm and Rural Development Act (7 U.S.C. 
2009bb et seq.).
    Special Impact Area means a Region served by a Project for which 
the requirements of section 302 of PWEDA and Sec.  303.7 of this 
chapter have, upon an application filed by an Eligible Recipient 
pursuant to section 214 of PWEDA and part 310 of this chapter, been 
waived in whole or in part by the Assistant Secretary.
    Special Need means a circumstance or legal status arising from 
actual or threatened severe unemployment or economic adjustment 
problems resulting from severe short-term or long-term changes in 
economic conditions, including:
    (1) Substantial outmigration or population loss;
    (2) Underemployment; that is, employment of workers at less than 
full-time or at less skilled tasks than their training or abilities 
permit;
    (3) Military base closures or realignments, defense contractor 
reductions-in-force, or U.S. Department of Energy defense-related 
funding reductions;
    (4) Natural or other major disasters or emergencies;
    (5) Extraordinary depletion of natural resources;
    (6) Closing or restructuring of an industrial firm or loss of a 
major employer;
    (7) Negative effects of changing trade patterns; or
    (8) Other circumstances set forth in an FFO.
    State means a State of the United States, the District of Columbia, 
the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, 
American Samoa, the Commonwealth of the Northern Mariana Islands, the 
Republic of the Marshall Islands, the Federated States of Micronesia, 
and the Republic of Palau.
    Trade Act means title II, chapters 3 and 5, of the Trade Act of 
1974, as amended (19 U.S.C. 2341 et seq.).
    United States means all of the States.

PART 301-- ELIGIBILITY, INVESTMENT RATE AND PROPOSAL AND 
APPLICATION REQUIREMENTS

Subpart A--General
Sec.
301.1 Overview of eligibility requirements.
Subpart B--Applicant Eligibility
301.2 Applicant eligibility.
Subpart C--Economic Distress Criteria
301.3 Economic distress levels.
Subpart D--Investment Rates and Matching Share Requirements
301.4 Investment rates.
301.5 Matching share requirements.
301.6 Supplementary investment assistance.
Subpart E--Proposal and Application Requirements; Evaluation Criteria
301.7 Investment assistance proposal.
301.8 Proposal evaluation criteria.
301.9 Proposal selection criteria.
301.10 Formal application requirements.

    Authority: 42 U.S.C. 3121; 42 U.S.C. 3141-3147; 42 U.S.C. 3149; 
42 U.S.C. 3161; 42 U.S.C. 3175; 42 U.S.C. 3192; 42 U.S.C. 3194; 42 
U.S.C. 3211; 42 U.S.C. 3233; Department of Commerce Delegation Order 
10-4.

Subpart A--General


Sec.  301.1  Overview of eligibility requirements.

    In order to receive EDA Investment Assistance, an applicant and the 
Project proposed by the applicant must satisfy each of the following 
requirements:
    (a) The applicant must be an Eligible Applicant as set forth in 
subpart B of this part;
    (b) The Region in which the Project will be located must meet the 
economic distress criteria set forth in subpart C of this part;
    (c) The sources of funding for the Project must fulfill the 
Investment Rate

[[Page 56678]]

and Matching Share requirements set forth in subpart D of this part;
    (d) EDA must select the Eligible Applicant's Project and the 
Eligible Applicant must satisfy the formal application requirements set 
forth in subpart E of this part; and
    (e) The Project must meet the general requirements set forth in 
part 302 (General Terms and Conditions for Investment Assistance) and 
the specific program requirements (as applicable) set forth in part 303 
(Planning Investments and Comprehensive Economic Development 
Strategies), part 304 (Economic Development Districts), part 305 
(Public Works and Economic Development Investments), part 306 
(Training, Research and Technical Assistance Investments), or part 307 
(Economic Adjustment Assistance Investments) of this chapter.

Subpart B--Applicant Eligibility


Sec.  301.2  Applicant eligibility.

    (a) An Eligible Applicant for EDA Investment Assistance is defined 
in Sec.  300.3 of this chapter.
    (b) An Eligible Applicant that is a non-profit organization must 
include in its application for Investment Assistance a resolution 
passed by (or a letter signed by) an authorized representative of a 
general purpose political subdivision of a State, acknowledging that it 
is acting in cooperation with officials of such political subdivision. 
EDA may waive this cooperation requirement for certain Projects of a 
significant Regional or national scope under parts 306 or 307 of this 
chapter. See Sec. Sec.  306.3(b), 306.6(b) and 307.5(b) of this 
chapter.

Subpart C--Economic Distress Criteria


Sec.  301.3  Economic distress levels.

    (a) Part 305 (Public Works and Economic Development Investments) 
and part 307 (Economic Adjustment Assistance Investments).
    (1) Except as otherwise provided by this paragraph (a), for a 
Project to be eligible for Investment Assistance under parts 305 or 307 
of this chapter, the Project must be located in a Region that, on the 
date EDA receives an application for Investment Assistance, is subject 
to one (or more) of the following economic distress criteria:
    (i) An unemployment rate that is, for the most recent twenty-four 
(24) month period for which data are available, at least one (1) 
percent greater than the national average unemployment rate;
    (ii) Per capita income that is, for the most recent period for 
which data are available, eighty (80) percent or less of the national 
average per capita income; or
    (iii) A Special Need, as determined by EDA.
    (2) A Project located within an Economic Development District, 
which is located in a Region that does not meet the economic distress 
criteria of paragraph (a)(1) of this section, is also eligible for 
Investment Assistance under parts 305 or 307 of this chapter if EDA 
determines that the Project will be of ``substantial direct benefit'' 
to a geographic area within the District that meets the criteria of 
paragraph (a)(1) of this section. For this purpose, a Project provides 
a ``substantial direct benefit'' if it provides significant employment 
opportunities for unemployed, underemployed or low-income residents of 
the geographic area within the District.
    (3) A Project located in a geographic area of poverty or high 
unemployment that meets the requirements of paragraph (a)(1) of this 
section, but which is located in a Region that overall does not meet 
the requirements of paragraph (a)(1) of this section, is eligible for 
Investment Assistance under parts 305 or 307 of this chapter without 
regard to political or other subdivisions or boundaries.
    (4) EDA will determine the economic distress levels pursuant to 
this subsection at the time EDA receives an application for Investment 
Assistance as follows:
    (i) For economic distress levels based upon the unemployment rate 
or per capita income requirements, EDA will base its determination upon 
the most recent American Community Survey (``ACS'') published by the 
U.S. Census Bureau for either: The Region where the Project will be 
located (paragraph (a)(1) of this section), the geographic area where 
substantial direct Project benefits will occur (paragraph (a)(2) of 
this section), or the geographic area of poverty or high unemployment 
(paragraph (a)(3) of this section), as applicable. Where a recent ACS 
is not available, EDA will base its decision upon the most recent 
Federal data from other sources (including data available from the 
Census Bureau and the Bureaus of Economic Analysis, Labor Statistics, 
Indian Affairs or any other Federal source determined by EDA to be 
appropriate). If no Federal data are available, an Eligible Applicant 
must submit to EDA the most recent data available from the State.
    (ii) For economic distress based upon a Special Need, EDA will 
conduct the independent analysis it deems necessary under the facts and 
circumstances of a given case. Eligible Applicants are encouraged to 
submit reliable data substantiating their claim of a Special Need.
    (b) Part 303 (Planning Investments) and part 306 (Training, 
Research and Technical Assistance Investments). There are no minimum 
economic distress level requirements for Investment Assistance awarded 
to Projects under parts 303 or 306 of this chapter.
    (c) Part 304 (Economic Development Districts). For EDA to designate 
a Region as an Economic Development District under part 304 of this 
chapter, such Region must:
    (1) Contain at least one (1) geographic area that fulfills the 
economic distress criteria set forth in paragraph (a)(1) of this 
section and is identified in an approved CEDS; and
    (2) Meet the Regional eligibility requirements set forth in Sec.  
304.1 of this chapter.
    (d) EDA reserves the right to reject any documentation of Project 
eligibility that it determines is inaccurate or otherwise unreliable.

Subpart D--Investment Rates and Matching Share Requirements


Sec.  301.4  Investment rates.

    (a) Minimum Investment Rate. There is no minimum Investment Rate 
for a Project.
    (b) Maximum Investment Rate.
    (1) General rule. Except as otherwise provided by this paragraph 
(b) or paragraph (c) of this section, the maximum EDA Investment Rate 
for all Projects shall, after the application of Table 1 in paragraph 
(b)(1)(ii) of this subsection, not exceed the sum of: (x) Fifty (50) 
percent, plus (y) up to an additional thirty (30) percent based on the 
relative needs of the Region in which the Project is located, as 
determined by EDA.
    (i)(A) Relative needs. In determining the relative needs of the 
Region in which the Project is located, EDA will prioritize allocations 
of its Investment Assistance to ensure that the level of economic 
distress of a Region, rather than a preference for a specific 
geographic area or a specific type of economic distress, is the primary 
factor in allocating its Investment Assistance. In making this 
determination, EDA will take into consideration the following measures 
of economic distress:
    (1) The severity of the unemployment rate and the duration of the 
unemployment in the Region;
    (2) The per capita income levels and the extent of underemployment 
in the Region;
    (3) The outmigration of population and the extent to which such

[[Page 56679]]

outmigration is causing economic injury in the Region; and
    (4) Such other factors as EDA deems relevant in determining the 
relative needs of the Region in which the Project is located.
    (B) A Project is eligible for the maximum allowable Investment Rate 
as determined by EDA between the time EDA receives the application for 
Investment Assistance and the time that EDA awards Investment 
Assistance to the Project; however, the burden is on the Eligible 
Applicant to establish the relative needs of the Region in which the 
Project is located.
    (ii) Table 1. Table 1 of this paragraph sets forth the maximum 
allowable Investment Rate for Projects located in Regions subject to 
certain levels of economic distress. In cases where Table 1 produces 
divergent results (i.e., where Table 1 produces more than one (1) 
maximum allowable Investment Rate based on the Region's levels of 
economic distress), the higher Investment Rate produced by Table 1 
shall be the maximum allowable Investment Rate for the Project.

                                 Table 1
------------------------------------------------------------------------
                                                              Maximum
                                                             allowable
          Projects located in regions in which:             investment
                                                               rates
                                                           (percentage)
------------------------------------------------------------------------
(A) The twenty-four (24) month unemployment rate is at                80
 least 225% of the national average; or.................
(B) The per capita income is not more than 50% of the                 80
 national average.......................................
(C) The twenty-four (24) month unemployment rate is at                70
 least 200% of the national average; or.................
(D) The per capita income is not more than 60% of the                 70
 national average.......................................
(E) The twenty-four (24) month unemployment rate is at                60
 least 175% of the national average; or.................
(F) The per capita income is not more than 65% of the                 60
 national average.......................................
(G) The twenty-four (24) month unemployment rate is at                50
 least 1% greater than the national average; or.........
(H) The per capita income is not more than 80% of the                 50
 national average.......................................
------------------------------------------------------------------------

    (2) Projects subject to a Special Need. EDA shall determine the 
maximum allowable Investment Rate for Projects subject to a Special 
Need (as determined by EDA pursuant to Sec.  301.3(a)(1)(iii)) based on 
the actual or threatened overall economic situation of the Region in 
which the Project is located. However, unless the Project is eligible 
for a higher Investment Rate pursuant to paragraph (b)(5) of this 
section, the maximum Investment Rate for any Project subject to a 
Special Need shall be eighty (80) percent.
    (3) Projects under part 303.
    (i) The minimum Investment Rate for Projects under part 303 of this 
chapter shall be fifty (50) percent.
    (ii) Except as otherwise provided in paragraph (b)(3)(iii) of this 
section or in paragraph (b)(5) of this section, the maximum allowable 
Investment Rate for Projects under part 303 of this chapter shall be 
the maximum allowable Investment Rate set forth in Table 1 for the most 
economically distressed county or other equivalent political unit 
(e.g., parish) within the Region. The maximum allowable Investment Rate 
shall not exceed eighty (80) percent.
    (iii) In compelling circumstances, the Assistant Secretary may 
waive the application of the first sentence in paragraph (b)(3)(ii) of 
this section. The Assistant Secretary shall not delegate the authority 
to grant a waiver under this paragraph.
    (4) Projects under part 306. The maximum allowable Investment Rate 
for Projects under part 306 of this chapter shall generally be 
determined based on the relative needs (as determined under paragraph 
(b)(1) of this section) of the Region which the Project will serve. 
However, for Projects of a national scope under part 306 of this 
chapter and for all other Projects under part 306 of this chapter 
(after the application of paragraph (b)(1) of this section), the 
Assistant Secretary has the discretion to establish a maximum 
Investment Rate of up to one hundred (100) percent where the Project:
    (i) Merits, and is not otherwise feasible without, an increase to 
the Investment Rate; or
    (ii) Will be of no or only incidental benefit to the Eligible 
Recipient.
    (5) Special Projects. Table 2 of this paragraph sets forth the 
maximum allowable Investment Rate for certain special Projects as 
follows:

                                 Table 2
------------------------------------------------------------------------
                                                              Maximum
                                                             allowable
                        Projects                            investment
                                                               rates
                                                           (percentage)
------------------------------------------------------------------------
Projects of Indian Tribes...............................             100
Projects under part 307 of this chapter located in                   100
 Presidentially-Declared Disaster areas for which EDA
 receives an application for Investment Assistance for
 post-disaster economic recovery efforts pursuant to a
 supplemental appropriation within eighteen (18) months
 of the date of such declaration........................
Projects of States or political subdivisions of States               100
 that the Assistant Secretary determines have exhausted
 their effective taxing and borrowing capacity, or
 Projects of non-profit organizations that the Assistant
 Secretary determines have exhausted their effective
 borrowing capacity.....................................
Projects under parts 305 or 307 that receive performance             100
 awards pursuant to Sec.   308.2 of this chapter........
Projects located in a District that receive planning                 100
 performance awards pursuant to Sec.   308.3 of this
 chapter................................................
------------------------------------------------------------------------

    (c) Federal Funding Opportunity notices may provide additional 
Investment Rate criteria and standards to ensure that the level of 
economic distress of a Region, rather than a preference for a 
geographic area or a specific type of economic distress, is the primary 
factor in allocating Investment Assistance.

[[Page 56680]]

Sec.  301.5  Matching share requirements.

    The required Matching Share of a Project's eligible costs may 
consist of cash or In-Kind Contributions. In addition, the Eligible 
Applicant must show that the Matching Share is committed to the 
Project, will be available as needed and is not or will not be 
conditioned or encumbered in any way that would preclude its use 
consistent with the requirements of the Investment Assistance.


Sec.  301.6  Supplementary investment assistance.

    (a) Pursuant to a request by an Eligible Applicant, EDA Investment 
Assistance may supplement grants awarded in another ``designated 
Federal grant program,'' if the Eligible Applicant qualifies for 
financial assistance under such program, but is unable to provide the 
required non-Federal share because of the Eligible Applicant's economic 
situation. For purposes of this section, a ``designated Federal grant 
program'' means any Federal grant program that:
    (1) Provides assistance in the construction or equipping of public 
works, public service or development facilities;
    (2) Is designated by EDA as eligible for supplementary Investment 
Assistance under this section; and
    (3) Assists Projects that are otherwise eligible for Investment 
Assistance and consistent with the Eligible Applicant's CEDS.
    (b) For Projects located in Regions meeting the criteria of Sec.  
301.3(a), the EDA Investment Assistance, combined with funds from a 
designated Federal grant program, may be at the maximum allowable 
Investment Rate, even if the designated Federal grant program has a 
lower grant rate. If the designated Federal grant program has a grant 
rate higher than the maximum EDA Investment Rate, the combination of 
EDA Investment and other Federal funds may exceed the EDA Investment 
Rate; provided, the EDA share of total funding does not exceed the 
maximum allowable Investment Rate.

Subpart E--Proposal and Application Requirements; Evaluation 
Criteria


Sec.  301.7  Investment Assistance proposal.

    (a) The EDA Investment Assistance process begins with the 
submission of an Investment Assistance proposal. Investment proposals 
are submitted on a Pre-application for Investment Assistance (Form ED-
900P or any successor form) that may be obtained from EDA's Internet 
Web site at http://www.eda.gov or from the appropriate regional office. 
EDA generally accepts proposals on a competitive and continuing basis 
to respond to market forces in Regional economies. The timing with 
which competitive investment opportunities arise, as determined by the 
criteria set forth in Sec.  301.8, paired with the availability of 
funds in a given fiscal year, will affect EDA's ability to participate 
in any given Project. EDA will evaluate all proposals using the 
criteria set forth in Sec.  301.8 and will:
    (1) Solicit a formal application from the proponent;
    (2) Return the proposal to the proponent for specified deficiencies 
and suggest resubmission upon corrections; or
    (3) Deny the proposal for specifically stated reasons and notify 
the proponent.
    (b) For certain programs, EDA may instruct an Eligible Applicant to 
submit an Application for Investment Assistance (Form ED-900A or any 
successor form) in lieu of the Pre-application for Investment 
Assistance (Form ED-900P or any successor form).


Sec.  301.8  Proposal evaluation criteria.

    EDA will screen all proposals for the feasibility of the budget 
presented and conformance with EDA statutory and regulatory 
requirements. EDA will assess the economic development needs of the 
affected Region in which the proposed Project will be located (or will 
service), as well as the capability of the proponent to implement the 
proposed Project. EDA will also consider the degree to which an 
Investment in the proposed Project will satisfy one (1) or more of the 
following criteria:
    (a) Is market-based and results driven. An Investment will 
capitalize on a Region's competitive strengths and will positively move 
a Regional economic indicator measured and evaluated by EDA on a 
performance matrix system, such as EDA's Balanced Scorecard or other 
performance matrix. These Regional economic indicators include measures 
such as an increased number of higher-skill, higher-wage jobs, 
increased tax revenue, or increased private sector investment resulting 
from an Investment.
    (b) Has strong organizational leadership. An Investment will have 
strong leadership, relevant Project management experience and a 
significant commitment of human resources talent to ensure a Project's 
successful execution.
    (c) Advances productivity, innovation and entrepreneurship. An 
Investment will embrace the principles of entrepreneurship, enhance 
Regional industry clusters and leverage and link technology innovators 
and local universities to the private sector to create the conditions 
for greater productivity, innovation, and job creation.
    (d) Looks beyond the immediate economic horizon, anticipates 
economic changes and diversifies the local and Regional economy. An 
Investment will be part of an overarching, long-term Comprehensive 
Economic Development Strategy that enhances a Region's success in 
achieving a rising standard of living by supporting existing industry 
clusters, developing emerging new clusters or attracting new Regional 
economic drivers.
    (e) Demonstrates a high degree of local commitment. An Investment 
will exhibit:
    (1) High levels of local government or non-profit Matching Share 
and private sector leverage;
    (2) Clear and unified leadership and support by local elected 
officials; and
    (3) Strong cooperation among the business sector, relevant Regional 
partners and Federal, State and local governments.
    (f) Other criteria as set forth in the applicable FFO.


Sec.  301.9  Proposal selection criteria.

    (a) EDA will review completed proposal materials for compliance 
with the requirements set forth in PWEDA, this chapter, the applicable 
FFO and other applicable Federal statutes and regulations. From those 
proposals that meet EDA's technical and legal requirements, EDA will 
select proposals for further consideration based on:
    (1) The availability of funds;
    (2) The competitiveness of the proposals based on the criteria set 
forth in Sec.  301.8; and
    (3) The funding priority considerations identified in the 
applicable FFO.
    (b) EDA will endeavor to notify proponents regarding whether their 
proposals are selected as soon as practicable.


Sec.  301.10  Formal application requirements.

    (a) General. For Projects selected from successful proposals, EDA 
will invite the proponents to submit a formal application for 
Investment Assistance. The appropriate regional office will provide 
application materials and guidance in completing them. The applicant 
will generally have thirty (30) days to submit the completed 
application materials to the applicable regional office. EDA staff will 
work with the applicant to resolve application deficiencies.
    (b) Formal application. Each formal application for EDA Investment 
Assistance must:

[[Page 56681]]

    (1) Include evidence of applicant eligibility (as set forth in 
Sec.  301.2) and of economic distress (as set forth in Sec.  301.3);
    (2) Identify the sources of funds, both eligible Federal and non-
EDA, and In-Kind Contributions that will constitute the required 
Matching Share for the Project (see the Matching Share requirements 
under Sec.  301.5); and
    (3) For construction Projects under parts 305 or 307 of this 
chapter, include a CEDS acceptable to EDA pursuant to part 303 of this 
chapter or otherwise incorporate by reference a current CEDS that EDA 
approves for the Project. The requirements of the preceding sentence 
shall not apply to:
    (i) Strategy Grants, as defined in Sec.  307.3 of this chapter; and
    (ii) Projects located in a Region designated as a Special Impact 
Area pursuant to part 310 of this chapter.

PART 302--GENERAL TERMS AND CONDITIONS FOR INVESTMENT ASSISTANCE

Sec.
302.1 Environment.
302.2 Procedures in disaster areas.
302.3 Project servicing for loans, loan guaranties and Investment 
Assistance.
302.4 Public information.
302.5 Relocation assistance and land acquisition policies.
302.6 Additional requirements; Federal policies and procedures.
302.7 Amendments and changes.
302.8 Pre-approval Investment Assistance costs.
302.9 Inter-governmental review of Projects.
302.10 Attorneys' and consultants' fees; employment of expediters 
and administrative employees.
302.11 Economic development information clearinghouse.
302.12 Project administration, operation and maintenance.
302.13 Maintenance of standards.
302.14 Records and audits.
302.15 Acceptance of certifications by Eligible Applicants.
302.16 Reports by recipients.
302.17 Conflicts of interest.
302.18 Post-approval requirements.
302.19 Indemnification.
302.20 Civil rights.

    Authority: 19 U.S.C. 2341 et seq.; 42 U.S.C. 3150; 42 U.S.C. 
3152; 42 U.S.C. 3153; 42 U.S.C. 3192; 42 U.S.C. 3193; 42 U.S.C. 
3194; 42 U.S.C. 3211; 42 U.S.C. 3212; 42 U.S.C. 3216; 42 U.S.C. 
3218; 42 U.S.C. 3220; 42 U.S.C. 5141; Department of Commerce 
Delegation Order 10-4.


Sec.  302.1  Environment.

    EDA will undertake environmental reviews of Projects in accordance 
with the requirements of the National Environmental Policy Act of 1969, 
as amended (Pub. L. 91-190; 42 U.S.C. 4321 et seq., as implemented 
under 40 CFR chapter V) (``NEPA''), and all applicable Federal 
environmental statutes, regulations and Executive Orders. These 
authorities include the implementing regulations of NEPA requiring EDA 
to provide public notice of the availability of project-specific 
environmental documents, such as environmental impact statements, 
environmental assessments, findings of no significant impact, and 
records of decision, to the affected or interested public, as specified 
in 40 CFR 1506.6(b). Depending on the Project's location, environmental 
information concerning specific Projects can be obtained from the 
Environmental Officer in the appropriate EDA regional office as listed 
in the applicable FFO.


Sec.  302.2  Procedures in disaster areas.

    When non-statutory EDA administrative or procedural conditions for 
Investment Assistance awards under PWEDA cannot be met by an Eligible 
Applicant as the result of a disaster, EDA may waive such conditions.


Sec.  302.3  Project servicing for loans, loan guaranties and 
Investment Assistance.

    EDA will provide Project servicing to borrowers who received EDA 
loans or EDA-guaranteed loans and to lenders who received EDA loan 
guaranties under any EDA-administered program. Project servicing 
includes but is not limited to loans made under PWEDA prior to the 
effective date of the Economic Development Administration Reform Act of 
1998, the Trade Act and the Community Emergency Drought Relief Act of 
1977 (Pub. L. 95-31; 42 U.S.C. 5184 note).
    (a) EDA will continue to monitor such loans and loan guaranties in 
accordance with the applicable loans or loan guaranty program(s).
    (b) Borrowers and lenders shall submit to EDA any requests for 
modifications of their loan or loan guaranty agreements with EDA, as 
applicable. EDA shall consider and respond to such modification 
requests in accordance with applicable laws and policies, including the 
budgetary constraints imposed by the Federal Credit Reform Act of 1990, 
as amended (2 U.S.C. 661c(e)).
    (c) In the event that EDA determines it necessary or desirable to 
take actions to protect or further the interests of EDA in connection 
with loans, loan guaranties or evidence of purchased debt, EDA may:
    (1) Assign or sell at public or private sale or otherwise dispose 
of for cash or credit, in its discretion and upon such terms and 
conditions as it shall determine to be reasonable, any evidence of 
debt, contract, claim, personal or real property, or security assigned 
to or held by it in connection with any EDA loans, EDA-guaranteed loans 
or Investment Assistance extended under PWEDA;
    (2) Collect or compromise all obligations assigned to or held by it 
in connection with any EDA loans, EDA-guaranteed loans or Investment 
Assistance awarded under PWEDA until such time as such obligations may 
be referred to the Attorney General of the United States for suit or 
collection; and
    (3) Take any and all other actions determined to be necessary or 
desirable in purchasing, servicing, compromising, modifying, 
liquidating, or otherwise administratively processing or disposing of 
loans or loan guaranties made or evidence of purchased debt in 
connection with any EDA loans, EDA-guaranteed loans or Investment 
Assistance awarded under PWEDA.


Sec.  302.4  Public information.

    The rules and procedures regarding public access to EDA's records 
pursuant to the Freedom of Information Act of 1967, as amended (5 
U.S.C. 552), and the Privacy Act of 1974, as amended (5 U.S.C. 552a), 
are at 15 CFR part 4.


Sec.  302.5  Relocation assistance and land acquisition policies.

    Recipients of EDA Investment Assistance under PWEDA and the Trade 
Act (States and political subdivisions of States and non-profits 
organizations, as applicable) are subject to the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970, as 
amended (Pub. L. 91-646; 42 U.S.C. 4601 et seq.). See 15 CFR part 11 
and 49 CFR part 24 for specific compliance requirements.


Sec.  302.6  Additional requirements; Federal policies and procedures.

    Recipients are subject to all Federal laws and to Federal, 
Department and EDA policies, regulations and procedures applicable to 
Federal financial assistance awards, including but not limited to 15 
CFR part 14, the Uniform Administrative Requirements for Grants and 
Cooperative Agreements with Institutions of Higher Education, 
Hospitals, other Non-Profit and Commercial Organizations, and 15 CFR 
part 24, the Uniform Administrative Requirements for Grants and 
Cooperative Agreements to State and Local Governments, as applicable.


Sec.  302.7  Amendments and changes.

    (a) Recipients shall submit requests for amendments to Investment 
awards in writing to EDA for approval and shall provide such 
information and

[[Page 56682]]

documentation as EDA deems necessary to justify the request.
    (b) Any changes to Projects made without EDA's approval are made at 
the Recipient's risk of non-payment of costs, suspension, termination 
or other applicable EDA action with respect to the Investment.


Sec.  302.8  Pre-approval Investment Assistance costs.

    Project activities carried out before approval of Investment 
Assistance shall be carried out at the sole risk of the Eligible 
Applicant. Such activity is subject to the rejection of the 
application, the disallowance of costs, or other adverse consequences 
as a result of non-compliance with EDA or Federal requirements, 
including but not limited to procurement requirements, civil rights 
requirements, Federal labor standards, or Federal environmental, 
historic preservation and related requirements.


Sec.  302.9  Inter-governmental review of projects.

    (a) When an Eligible Applicant is not a State, Indian Tribe or 
other general purpose governmental authority, the Eligible Applicant 
must afford the appropriate general purpose local governmental 
authority (the ``Authority'') in the Region a minimum of fifteen (15) 
days to review and comment on a proposed Project under EDA's Public 
Works and Economic Development program or a proposed construction 
Project or RLF Grant under EDA's Economic Adjustment Assistance 
program. Under these programs, Eligible Applicants shall furnish the 
following with their applications: If no comments are received from the 
Authority, a statement of efforts made to obtain such comments; or, if 
comments are received from the Authority, a copy of the comments and a 
statement of any actions taken to address such comments.
    (b) As required by 15 CFR part 13 and Executive Order 12372, 
``Intergovernmental Review of Federal Programs,'' as amended, if a 
State has adopted a process under Executive Order 12372 to review and 
coordinate proposed Federal financial assistance and direct Federal 
development (commonly referred to as the ``single point of contact 
review process''), all Eligible Applicants must also give State and 
local governments a reasonable opportunity to review and comment on the 
proposed Project, including review and comment from area-wide planning 
organizations in metropolitan areas, as provided for in 15 CFR part 13.


Sec.  302.10  Attorneys' and consultants' fees; employment of 
expediters and administrative employees.

    (a) General. Investment Assistance awarded under PWEDA shall not 
directly or indirectly reimburse any attorneys' or consultants' fees 
incurred in connection with obtaining Investment Assistance and 
contracts under PWEDA.
    (b) Employment of expediters and administrative employees. 
Investment Assistance under PWEDA shall not be awarded to any Eligible 
Applicant, unless the owners, partners or officers of the Eligible 
Applicant:
    (1) Certify to EDA the names of any attorneys, agents and other 
persons engaged by or on behalf of the Eligible Applicant for the 
purpose of expediting applications made to EDA in connection with 
obtaining Investment Assistance under PWEDA and the fees paid or to be 
paid to the person for expediting the applications; and
    (2) Upon EDA's request, execute an agreement binding the Eligible 
Applicant, for the two-year (2) period beginning on the date on which 
the Investment Assistance is awarded to the Eligible Applicant, to 
refrain from employing, offering any office or employment to or 
retaining for professional services any person who, on the date on 
which the Investment Assistance is awarded or within the one-year (1) 
period ending on that date:
    (i) Served as an officer, attorney, agent or employee of the 
Department; and
    (ii) Occupied a position or engaged in activities that the 
Assistant Secretary determines involved discretion with respect to the 
award of Investment Assistance under PWEDA.


Sec.  302.11  Economic development information clearinghouse.

    Pursuant to section 502 of PWEDA, EDA maintains an economic 
development information clearinghouse on its Internet Web site at 
http://www.eda.gov.


Sec.  302.12  Project administration, operation and maintenance.

    EDA shall approve Investment Assistance awards only if, as 
determined in its sole discretion, the Project for which such 
Investment Assistance is awarded will be properly and efficiently 
administered, operated and maintained.


Sec.  302.13  Maintenance of standards.

    All laborers and mechanics employed by contractors or 
subcontractors on Projects receiving Investment Assistance under PWEDA 
shall be paid wages at rates not less than those prevailing on similar 
construction in the locality, as determined by the U.S. Secretary of 
Labor in accordance with subchapter IV of chapter 31 of title 40, 
United States Code. EDA shall not extend any Investment Assistance 
under this chapter for a Project without first obtaining adequate 
assurance that these labor standards will be maintained upon the 
construction work. The U.S. Secretary of Labor shall have, with respect 
to the labor standards specified in this provision, the authority and 
functions set forth in Reorganization Plan No. 14 of 1950 (15 FR 3176 
(May 25, 1950); 64 Stat. 1267) and section 3145 of title 40, United 
States Code.


Sec.  302.14  Records and audits.

    (a) Records. Recipients of Investment Assistance under PWEDA shall 
keep such records as EDA shall require, including records that fully 
disclose:
    (1) The amount and the disposition by the Recipient of the proceeds 
of the awarded Investment Assistance;
    (2) The total cost of the Project that the Investment Assistance 
funds;
    (3) The amount and nature of the portion of Project costs provided 
by other sources; and
    (4) Such other records as EDA determines will facilitate an 
effective audit.
    (b) Audits. The Recipient shall permit the Assistant Secretary, the 
Inspector General of the Department, the Comptroller General of the 
United States and/or any of their respective agents or representatives 
access to its properties in order to examine all books, correspondence, 
and records, including without limitation computer programs and data 
processing software, to verify the Recipient's compliance with 
Investment Assistance requirements.


Sec.  302.15  Acceptance of certifications by Eligible Applicants.

    EDA will accept an Eligible Applicant's certifications, accompanied 
by evidence satisfactory to EDA, that the Eligible Applicant meets the 
requirements for receiving Investment Assistance.


Sec.  302.16  Reports by Recipients.

    (a) In general, each Recipient must submit reports to EDA at 
intervals and in the manner that EDA shall require, except that EDA 
shall not require any report to be submitted more than ten (10) years 
after the date of closeout of the Investment Assistance.
    (b) Each report must contain a data-specific evaluation of the 
effectiveness of the Investment Assistance provided in fulfilling the 
Project's purpose (including alleviation of economic distress) and in 
meeting the objectives

[[Page 56683]]

of PWEDA. Data used by a Recipient in preparing reports shall be 
accurate and verifiable as determined by EDA, and from independent 
sources (whenever possible). EDA will use this data and report to 
fulfill its performance measurement reporting requirements under the 
Government Performance and Results Act of 1993 and to monitor internal, 
Investment and Project performance through an internal performance 
measurement system, such as the EDA Balanced Scorecard or other system.
    (c) To enable EDA to determine the economic development effect of 
Projects that provide service benefits, EDA may require that Recipients 
submit a Project service map and information from which to determine 
whether services are provided to all segments of the Region being 
assisted.


Sec.  302.17  Conflicts of interest.

    (a) General. It is EDA's and the Department's policy to maintain 
the highest standards of conduct to prevent conflicts of interest in 
connection with the award of Investment Assistance or its use for 
reimbursement or payment of costs (e.g., procurement of goods or 
services) by or to the Recipient. A conflict of interest generally 
exists when an Interested Party participates in a matter that has a 
direct and predictable effect on the Interested Party's personal or 
financial interests. A conflict may also exist where there is an 
appearance that an Interested Party's objectivity in performing his or 
her responsibilities under the Project is impaired. For example, an 
appearance of impairment of objectivity may result from an 
organizational conflict where, because of other activities or 
relationships with other persons or entities, an Interested Party is 
unable to render impartial assistance, services or advice to the 
Recipient, a participant in the Project or to the Federal government. 
Additionally, a conflict of interest may result from non-financial gain 
to an Interested Party, such as benefit to reputation or prestige in a 
professional field.
    (b) Prohibition on direct or indirect financial or personal 
benefits.
    (1) An Interested Party shall not receive any direct or indirect, 
financial or personal benefits in connection with the award of 
Investment Assistance or its use for payment or reimbursement of costs 
by or to the Recipient. Recipients shall establish safeguards to 
prohibit an Interested Party from using its position for a purpose that 
constitutes or presents the appearance of personal or organizational 
conflicts of interest or of personal gain. See also 15 CFR 14.42 and 
24.36(b)(3); Forms SF-424B and SF-424D.
    (2) An Interested Party shall also not, directly or indirectly, 
solicit or accept any gift, gratuity, favor, entertainment or other 
benefit having monetary value, for himself or herself or for another 
person or entity, from any person or organization which has obtained or 
seeks to obtain Investment Assistance from EDA.
    (3) Costs incurred in violation of any conflicts of interest rules 
contained in this chapter or in violation of any assurances by the 
Recipient may be denied reimbursement.
    (4) See Sec.  315.15 of this chapter for special conflicts of 
interest rules for Trade Adjustment Assistance Investments.
    (c) Special rules for Revolving Loan Fund (``RLF'') Grants. In 
addition to the rules set forth in this section:
    (1) An Interested Party of a Recipient of an RLF Grant shall not 
receive, directly or indirectly, any personal or financial benefits 
resulting from the disbursement of RLF loans;
    (2) A Recipient of an RLF Grant shall also not lend RLF funds to an 
Interested Party; and
    (3) Former board members of a Recipient of an RLF Grant and members 
of his or her Immediate Family shall not receive a loan from such RLF 
for a period of two (2) years from the date that the board member last 
served on the RLF's board of directors.


Sec.  302.18  Post-approval requirements.

    (a) General. A Recipient must comply with all financial, 
performance, progress report and other requirements set forth in the 
terms and conditions of the Investment Assistance, including any 
special terms and applicable Federal cost principles (collectively, 
``Post-Approval Requirements''). A Recipient's failure to comply with 
Post-Approval Requirements may result in the disallowance of costs, 
termination of the Investment Assistance award, or other adverse 
consequences to the Recipient.
    (b) Part 307 (Economic Adjustment Assistance Investments). 
Recipients of Economic Adjustment Assistance Investments under part 307 
of this chapter must comply with the Post-Approval Requirements set 
forth in Sec.  307.6 of this chapter.


Sec.  302.19  Indemnification.

    To the maximum extent permitted by law, a Recipient shall indemnify 
and hold EDA harmless from any liability that EDA may incur due to the 
actions or omissions of the Recipient.


Sec.  302.20  Civil rights.

    (a) Discrimination is prohibited by a Recipient or Other Party (as 
defined in paragraph (b) of this section) with respect to a Project 
receiving Investment Assistance under PWEDA or by an entity receiving 
Adjustment Assistance (as defined in Sec.  315.2 of this chapter) under 
the Trade Act, in accordance with the following authorities:
    (1) Section 601 of Title VI of the Civil Rights Act of 1964, as 
amended (42 U.S.C. 2000d et seq.) (proscribing discrimination on the 
basis of race, color, or national origin), and the Department's 
implementing regulations found at 15 CFR part 8;
    (2) 42 U.S.C. 3123 (proscribing discrimination on the basis of sex 
in Investment Assistance provided under PWEDA) and 42 U.S.C. 6709 
(proscribing discrimination on the basis of sex under the Local Public 
Works Program), and the Department's implementing regulations found at 
15 CFR 8.7 through 8.15;
    (3) Section 504 of the Rehabilitation Act of 1973, as amended (29 
U.S.C. 794) (proscribing discrimination on the basis of disabilities), 
and the Department's implementing regulations found at 15 CFR part 8b;
    (4) The Age Discrimination Act of 1975, as amended (42 U.S.C. 6101 
et seq.) (proscribing discrimination on the basis of age), and the 
Department's implementing regulations found at 15 CFR part 20; and
    (5) Other Federal statutes, regulations and Executive Orders, as 
applicable.
    (b) Definitions. (1) For purposes of this section, an ``Other 
Party'' means an ``other party subject to this part,'' as defined in 15 
CFR 8.3(l), and includes an entity which (or which is intended to) 
creates and/or saves fifteen (15) or more permanent jobs as a result of 
Investment Assistance; provided that such entity is also either 
specifically named in the application as benefiting from the Project, 
or is or will be located in an EDA building, port, facility, or 
industrial, commercial or business park constructed or improved in 
whole or in part with Investment Assistance prior to EDA's final 
disbursement of Investment Assistance funds.
    (2) Additional applicable definitions are provided in 15 CFR part 
8.
    (c) No Recipient or Other Party shall intimidate, threaten, coerce 
or discriminate against any person for the purpose of interfering with 
any right or privilege secured by 42 U.S.C. 3123 or 42 U.S.C. 6709, or 
because the person has made a complaint, testified, assisted or 
participated in any manner in an investigation, proceeding or hearing 
under this section.

[[Page 56684]]

    (d) All Recipients of Investment Assistance under PWEDA, all Other 
Parties and all entities receiving Adjustment Assistance under the 
Trade Act must submit to EDA written assurances that they will comply 
with applicable laws, EDA regulations, Department regulations, and such 
other requirements as may be applicable, prohibiting discrimination.
    (e) Reporting and other procedural matters are set forth in 15 CFR 
parts 8, 8a, 8b, 8c and 20.

PART 303--PLANNING INVESTMENTS AND COMPREHENSIVE ECONOMIC 
DEVELOPMENT STRATEGIES

Sec.
303.1 Purpose and scope.
303.2 Definitions.
303.3 Application requirements and evaluation criteria.
303.4 Award requirements.
303.5 Eligible administrative expenses.
303.6 EDA-funded CEDS process.
303.7 Requirements for Comprehensive Economic Development 
Strategies.
303.8 Requirements for State plans.
303.9 Requirements for short-term Planning Investments.

    Authority: 42 U.S.C. 3143; 42 U.S.C. 3162; 42 U.S.C. 3174; 42 
U.S.C. 3211; Department of Commerce Organization Order 10-4.


Sec.  303.1  Purpose and scope.

    The purpose of EDA Planning Investments is to provide support to 
Planning Organizations for the development, implementation, revision or 
replacement of Comprehensive Economic Development Strategies, and for 
related short-term Planning Investments and State plans designed to 
create and retain higher-skill, higher-wage jobs, particularly for the 
unemployed and underemployed in the nation's most economically 
distressed Regions. EDA's Planning Investments support partnerships 
with District Organizations, Indian Tribes, community development 
corporations, non-profit regional planning organizations and other 
Eligible Recipients. Planning activities supported by these Investments 
must be part of a continuous process involving the active participation 
of Private Sector Representatives, public officials and private 
citizens, and include:
    (a) Analyzing local economies;
    (b) Defining economic development goals;
    (c) Determining Project opportunities; and
    (d) Formulating and implementing an economic development program 
that includes systematic efforts to reduce unemployment and increase 
incomes.


Sec.  303.2  Definitions.

    In addition to the defined terms set forth in Sec.  300.3 of this 
chapter, the following terms used in this part shall have the following 
meanings:
    Planning Investment means the award of EDA Investment Assistance 
under section 203 of PWEDA and this part.
    Planning Organization means a Recipient whose purpose is to develop 
and implement a CEDS for a specific EDA-approved Region under section 
203 of PWEDA.
    Strategy Committee means the committee or other entity identified 
by the Planning Organization as responsible for the development, 
implementation, revision or replacement of the CEDS for the Planning 
Organization.


Sec.  303.3  Application requirements and evaluation criteria.

    (a) For Planning Investment awards, EDA uses the general 
application evaluation criteria set forth in Sec.  301.8 of this 
chapter. In addition, applications for Planning Investments must 
include information about the following:
    (1) The proposed scope of work for the development, implementation, 
revision or replacement of the CEDS, or the relation of the CEDS to the 
proposed short-term planning activities or the State plan;
    (2) Qualifications of the Eligible Applicant to implement the goals 
and objectives resulting from the CEDS, short-term planning activities 
or the State plan;
    (3) The involvement of the Region's business leadership at each 
stage of the preparation of the CEDS, short-term planning activities or 
State plan;
    (4) Extent of broad-based representation and involvement of the 
Region's civic, business, labor, minority and other interests in the 
Eligible Applicant's economic development activities; and
    (5) Feasibility of the proposed scope of work to create and retain 
higher-skill, higher-wage jobs through implementation of the CEDS.
    (b) In addition to the criteria set forth in paragraph (a) of this 
section, funded Recipients are evaluated on the basis of the extent of 
continuing economic distress within the Region, their past performance, 
and the overall effectiveness of their CEDS.
    (c) For Planning Investment awards to a State, the Assistant 
Secretary shall also consider the extent to which the State will 
integrate and coordinate its CEDS with local and Economic Development 
District plans.
    (d) The Investment Rates for Planning Investments will be 
determined in accordance with Sec.  301.4 of this chapter.


Sec.  303.4  Award requirements.

    (a) Planning Investments shall function in conjunction with any 
other available Federal, State or local planning assistance to ensure 
adequate and effective planning and economical use of funds.
    (b) Except in compelling circumstances as determined by the 
Assistant Secretary, EDA will not provide Planning Investments for 
multiple CEDS that address the needs of an identical or substantially 
similar Region.
    (c) EDA will provide a Planning Investment for the period of time 
required to develop, revise or replace, and implement a CEDS, generally 
in thirty-six (36) month renewable Investment award periods.


Sec.  303.5  Eligible administrative expenses.

    In accordance with applicable Federal cost principles, Planning 
Investments may be used to pay the direct and indirect costs incurred 
by a Planning Organization in the development, implementation, revision 
or replacement of a CEDS and for related short-term planning 
activities.


Sec.  303.6  EDA-funded CEDS process.

    If EDA awards Investment Assistance to a Planning Organization to 
develop, revise or replace a CEDS, the Planning Organization must 
follow the procedures set forth in this section:
    (a) The Planning Organization must appoint a Strategy Committee. 
The Strategy Committee must represent the main economic interests of 
the Region and must include Private Sector Representatives as a 
majority of its membership. In addition, the Planning Organization 
should ensure that the Strategy Committee includes public officials, 
community leaders, representatives of workforce development boards, 
institutions of higher education, minority and labor groups, and 
private individuals. The Strategy Committee representing Indian Tribes 
or States may vary.
    (b) The Planning Organization must develop and submit to EDA a CEDS 
that:
    (1) Complies with the requirements of Sec.  303.7; and
    (2) Was made available for review and comment by the public for a 
period of at least thirty (30) days prior to submission to EDA.
    (c)(1) After obtaining EDA approval of the CEDS, the Planning 
Organization must submit annually an updated CEDS performance report to 
EDA.
    (2) The Planning Organization must submit a new or revised CEDS to 
EDA at least every five (5) years, unless EDA or the Planning 
Organization determines

[[Page 56685]]

that a new or revised CEDS is required earlier due to changed 
circumstances.
    (3) Any updated CEDS performance report that results in a change of 
the requirements set forth in Sec.  303.7(b)(3) of the EDA-accepted 
CEDS or any new or revised CEDS, must be available for review and 
comment by the public in accordance with paragraph (b)(2) of this 
section.
    (d) If EDA determines that implementation of the CEDS is 
inadequate, it will notify the Planning Organization in writing and the 
Planning Organization shall submit to EDA a new or revised CEDS.
    (e) If any part of a Region is covered by one or more of the 
Regional Commissions as set forth in section 404 of PWEDA, the Planning 
Organization shall ensure that a copy of the CEDS is provided to the 
Regional Commission(s).


Sec.  303.7  Requirements for Comprehensive Economic Development 
Strategies.

    (a) General. CEDS are designed to bring together the public and 
private sectors in the creation of an economic roadmap to diversify and 
strengthen Regional economies. The CEDS should analyze the Regional 
economy and serve as a guide for establishing Regional goals and 
objectives, developing and implementing a Regional plan of action, and 
identifying investment priorities and funding sources. Public and 
private sector partnerships are critical to the implementation of the 
integral elements of a CEDS set forth in paragraph (b) of this section. 
As a performance-based plan, the CEDS will serve a critical role in a 
Region's efforts to defend against economic dislocations due to global 
trade, competition and other events resulting in the loss of jobs and 
private investment.
    (b) Technical requirements. A CEDS must be the result of a 
continuing economic development planning process, developed with broad-
based and diverse public and private sector participation, and shall 
contain the following:
    (1) A background of the economic development situation of the 
Region with a discussion of the economy, population, geography, 
workforce development and use, transportation access, resources, 
environment and other pertinent information;
    (2) An in-depth analysis of economic and community development 
problems and opportunities, including:
    (i) Incorporation of relevant material from other government-
sponsored or supported plans and consistency with applicable State and 
local workforce investment strategies; and
    (ii) An identification of past, present and projected future 
economic development investments in the Region covered;
    (3) A section setting forth goals and objectives necessary to solve 
the economic development problems of the Region;
    (4) A discussion of community and private sector participation in 
the CEDS effort;
    (5) A section listing all suggested Projects and the projected 
numbers of jobs to be created as a result thereof;
    (6) A section identifying and prioritizing vital Projects, programs 
and activities that address the Region's greatest needs or that will 
best enhance the Region's competitiveness, including sources of funding 
for past and potential future Investments;
    (7) A section identifying economic clusters within the Region, 
focusing on those that are growing or in decline;
    (8) A plan of action to implement the goals and objectives of the 
CEDS, including:
    (i) Promoting economic development and opportunity;
    (ii) Fostering effective transportation access;
    (iii) Enhancing and protecting the environment;
    (iv) Maximizing effective development and use of the workforce 
consistent with any applicable State or local workforce investment 
strategy;
    (v) Promoting the use of technology in economic development, 
including access to high-speed telecommunications;
    (vi) Balancing resources through sound management of physical 
development; and
    (vii) Obtaining and utilizing adequate funds and other resources; 
and
    (9) A list of performance measures used to evaluate the Planning 
Organization's successful development and implementation of the CEDS, 
including but not limited to the following:
    (i) Number of jobs created after implementation of the CEDS;
    (ii) Number and types of investments undertaken in the Region;
    (iii) Number of jobs retained in the Region;
    (iv) Amount of private sector investment in the Region after 
implementation of the CEDS; and
    (v) Changes in the economic environment of the Region; and
    (10) A section outlining the methodology for cooperating and 
integrating the CEDS with a State's economic development priorities.
    (c) Consideration of non-EDA funded CEDS.
    (1) In determining the acceptability of a CEDS prepared 
independently of EDA Investment Assistance or oversight for Projects 
under parts 305 and 307 of this chapter, EDA may in its discretion 
determine that the CEDS is acceptable without fulfilling all the 
requirements of paragraph (b) of this section. In doing so, EDA shall 
consider the circumstances surrounding the application for Investment 
Assistance, including emergencies or natural disasters and the 
fulfillment of the requirements of section 302 of PWEDA.
    (2) If the CEDS for a Project under parts 305 and 307 of this 
chapter is developed under another federally-supported program, it must 
include acceptable performance measures similar to those set forth in 
paragraph (b) of this section and information on the state of the 
Regional economy. To the maximum extent practicable, the CEDS shall be 
consistent and coordinated with any existing economic development plan 
for the Region.


Sec.  303.8  Requirements for State plans.

    (a) As a condition of a State receiving a Planning Investment:
    (1) The State must have or develop a CEDS that meets the 
requirements of Sec.  303.7;
    (2) Any State plan developed with Planning Investment Assistance 
must, to the maximum extent practicable, be developed cooperatively by 
the State, political subdivisions of the State, and the Economic 
Development Districts located wholly or partially in the State; and
    (3) The State must submit to EDA an annual report on any State plan 
receiving Planning Investment Assistance.
    (b) Before awarding a Planning Investment to a State, EDA shall 
consider the extent to which the State will take into account local and 
District economic development plans.


Sec.  303.9  Requirements for short-term Planning Investments.

    (a) In addition to providing support for CEDS and State plans, EDA 
may also provide Investment Assistance to support short-term planning 
activities. EDA may provide such Investment Assistance to:
    (1) Develop the economic development planning capacity of States, 
cities and other Eligible Applicants experiencing economic distress;
    (2) Assist in institutional capacity building; or
    (3) Undertake innovative approaches to economic development.
    (b) Eligible activities may include but are not limited to updating 
a portion of

[[Page 56686]]

a CEDS, economic analysis, development of economic development policies 
and procedures, and development of economic development goals.
    (c) Applicants for short-term Planning Investments must provide 
performance measures acceptable to EDA that can be used to evaluate the 
success of the program and provide EDA with progress reports during the 
term of the Planning Investment, as set forth in the Investment 
agreement.

PART 304--ECONOMIC DEVELOPMENT DISTRICTS

Sec.
304.1 Designation of Economic Development Districts: Regional 
eligibility.
304.2 District Organizations: Formation, organizational requirements 
and operations.
304.3 District modification and termination.
304.4 Performance evaluations.

    Authority: 42 U.S.C. 3122; 42 U.S.C. 3171; 42 U.S.C. 3172; 42 
U.S.C. 3196; Department of Commerce Organization Order 10-4.


Sec.  304.1  Designation of Economic Development Districts: Regional 
eligibility.

    Upon the request of a District Organization (as defined in Sec.  
304.2), EDA may designate a Region as an Economic Development District 
if such Region:
    (a) Contains at least one (1) geographic area that is subject to 
the economic distress criteria set forth in Sec.  301.3(a)(1) of this 
chapter and is identified in an approved CEDS;
    (b) Is of sufficient size or population and contains sufficient 
resources to foster economic development on a scale involving more than 
a single geographic area subject to the economic distress criteria set 
forth in Sec.  301.3(a)(1) of this chapter;
    (c) Has an EDA-approved CEDS that
    (1) Meets the requirements under Sec.  303.7 of this chapter;
    (2) Contains a specific program for intra-District cooperation, 
self-help, and public investment; and
    (3) Is approved by each affected State and by the Assistant 
Secretary;
    (d) Obtains commitments from at least a majority of the counties or 
other areas within the proposed District, as determined by EDA, to 
support the economic development activities of the District; and
    (e) Obtains the concurrence with the designation request from the 
State (or States) in which the proposed District will be wholly or 
partially located.


Sec.  304.2  District Organizations: Formation, organizational 
requirements and operations.

    (a) General. A ``District Organization'' is an entity that 
satisfies the formation and organizational requirements under 
paragraphs (b) and (c) of this section.
    (b) Formation. A District Organization must be organized as one of 
the following:
    (1) A public organization formed through an inter-governmental 
agreement providing for the joint exercise of local government powers; 
or
    (2) A public organization established under State-enabling 
legislation for the creation of multi-jurisdictional area-wide planning 
organizations; or
    (3) A non-profit organization incorporated under the applicable 
non-profit statutes of the State in which it is incorporated.
    (c) Organization and governance.
    (1) Each District Organization must meet the requirements of this 
paragraph (c) concerning membership composition, the maintenance of 
adequate staff support to perform its economic development functions, 
and its authorities and responsibilities for carrying out economic 
development functions. The District Organization's board of directors 
(or other governing body) must also meet these requirements.
    (2) The District Organization must demonstrate that its governing 
body is broadly representative of the principal economic interests of 
the Region, and, unless otherwise prohibited by applicable State or 
local law, must include at least one (1) Private Sector Representative 
and one (1) or more of the following: Executive Directors of Chambers 
of Commerce, or representatives of institutions of post-secondary 
education, workforce development groups or labor groups, all of which 
must comprise in the aggregate a minimum of thirty-five (35) percent of 
the District Organization's governing body. The governing body shall 
also have at least a simple majority of its membership who are elected 
officials and/or employees of a general purpose unit of State, local or 
Indian tribal government who have been appointed to represent the 
government. Upon the District Organization's showing of its inability 
to locate a Private Sector Representative to serve on its governing 
body following extensive due diligence, the Assistant Secretary may 
waive the Private Sector Representative requirement. The Assistant 
Secretary shall not delegate the authority to grant a waiver under this 
paragraph.
    (3) The District Organization must be assisted by a professional 
staff drawn from qualified persons in economic development, planning, 
business development or related disciplines.
    (4) The governing bodies of District Organizations must provide 
access for persons who are not members to make their views known 
concerning ongoing and proposed District activities in accordance with 
the following requirements:
    (i) The District Organization must hold meetings open to the public 
at least once a year and shall also publish the date and agenda of such 
meetings sufficiently in advance to allow the public a reasonable time 
to prepare in order to participate effectively.
    (ii) The District Organization shall adopt a system of 
parliamentary procedures to assure that board members and others have 
access to an effective opportunity to participate in the affairs of the 
District.
    (iii) The District Organization shall provide information 
sufficiently in advance of decisions to give the public adequate 
opportunity to review and react to proposals. District Organizations 
should communicate technical data and other material to the public so 
they may understand the impact of public programs, available options 
and alternative decisions.
    (iv) The District Organization must make available to the public 
such audited statements, annual budgets and minutes of public meetings, 
as may be reasonably requested.
    (v) The District Organization and its board of directors must 
comply with all Federal and State financial assistance reporting 
requirements and the conflicts of interest provisions set forth in 
Sec.  302.17 of this chapter.
    (d) Operations. (1) The District Organization shall engage in the 
full range of economic development activities listed in its EDA-
approved CEDS. These activities may include:
    (i) Coordinating and implementing economic development activities 
in the District;
    (ii) Carrying out economic development research, planning, 
implementation and advisory functions identified in the CEDS; and
    (iii) Coordinating the development and implementation of the CEDS 
with other local, State, Federal and private organizations.
    (2) The District Organization may at its option contract for 
services to accomplish the activities listed in paragraphs (d)(1)(i) 
through (iii) of this section.


Sec.  304.3  District modification and termination.

    (a) Modification. Upon the request of a District Organization and 
with the

[[Page 56687]]

concurrence of the State or States affected (unless such concurrence is 
waived by the Assistant Secretary), EDA may modify the geographic 
boundaries of a District, if it determines that such modification will 
contribute to a more effective program for economic development.
    (b) Termination. EDA may, upon sixty (60) days prior written notice 
to the District Organization, member counties and other areas 
determined by EDA and each affected State, terminate a Region's 
designation as an Economic Development District when:
    (1) A District or District Organization no longer meets the 
requirements of Sec. Sec.  304.1 or 304.2; or
    (2) EDA determines that the District Organization fails to execute 
its CEDS according to the development, implementation and other 
performance measures set forth therein; or
    (3) A District Organization has requested termination.
    (c) Prior to terminating a District Organization under paragraph 
(b)(2) of this section, EDA will consult with the District Organization 
and consider all facts and circumstances regarding the District 
Organization's operations. EDA will not terminate a District's 
designation based on circumstances beyond the control of the District 
Organization (e.g., natural disaster, plant closure, overall economic 
downturn, sudden and severe economic dislocation, or other situation).
    (d) EDA may further modify or terminate a Region's designation as a 
District according to the standards set forth in an FFO.


Sec.  304.4  Performance evaluations.

    (a) EDA shall evaluate the management standards, financial 
accountability and program performance of each District Organization 
within three (3) years after the initial Investment award and at least 
once every three (3) years thereafter, so long as the District 
Organization continues to receive Investment Assistance. EDA's 
evaluation shall assess:
    (1) The continuing Regional eligibility of the District, as set 
forth in Sec.  304.1;
    (2) The management of the District Organization, as set forth in 
Sec.  304.2; and
    (3) The implementation of the CEDS, including the District 
Organization's performance and contribution towards the retention and 
creation of employment, as set forth in Sec.  303.7 on this chapter.
    (b) For peer review, EDA shall ensure the participation of at least 
one (1) other District Organization in the performance evaluation on a 
cost-reimbursement basis.

PART 305--PUBLIC WORKS AND ECONOMIC DEVELOPMENT INVESTMENTS

Subpart A--General
Sec.
305.1 Purpose and scope.
305.2 Award requirements.
305.3 Application requirements.
305.4 Projects for design and engineering work.
Subpart B--Requirements for Approved Projects
305.5 Project administration by District Organization.
305.6 Allowable methods of procurement for construction services.
305.7 Services performed by the Recipient's own forces.
305.8 Recipient-furnished equipment and materials.
305.9 Project phasing and Investment disbursement.
305.10 Bid underrun.
305.11 Contract awards; early construction start.
305.12 Project sign.
305.13 Contract change orders.
305.14 Occupancy prior to completion.

    Authority: 42 U.S.C. 3211; 42 U.S.C. 3141; Department of 
Commerce Organization Order 10-4.

Subpart A--General


Sec.  305.1  Purpose and scope.

    Public Works and Economic Development Investments (``Public Works 
Investments'') intend to help the nation's most distressed communities 
revitalize, expand and upgrade their physical infrastructure to attract 
new industry, encourage business expansion, diversify local economies 
and generate or retain long-term private sector jobs and investments. 
The primary goal of these Investments is the creation of new, or the 
retention of existing, long-term private sector job opportunities in 
communities experiencing significant economic distress as evidenced by 
chronic high unemployment, underemployment, low per capita income, 
outmigration, or a Special Need. These Investments also intend to 
assist communities in attracting private capital investment and higher-
skill, higher-wage job opportunities and to promote the successful 
long-term economic recovery of a Region.


Sec.  305.2  Award requirements.

    (a) Project scope. Public Works Investments may fund the following 
activities:
    (1) Acquisition or development of land and improvements for use in 
a public works, public service or other type of development facility; 
or
    (2) Acquisition, design and engineering, construction, 
rehabilitation, alteration, expansion, or improvement of such a 
facility, including related machinery and equipment.
    (b) Requirements. A Public Works Investment may be made if EDA 
determines that:
    (1) The Project will, directly or indirectly:
    (i) Improve the opportunities for the successful establishment or 
expansion of industrial or commercial plants or facilities in the 
Region where the Project is located;
    (ii) Assist in the creation of additional long-term employment 
opportunities in the Region; or
    (iii) Primarily benefit the long-term unemployed and members of 
low-income families in the Region;
    (2) The Project will fulfill a pressing need of the Region, or a 
part of the Region, in which the Project is located; and
    (3) The Region in which the Project is located has a CEDS and the 
Project is consistent with the CEDS.
    (c) Not more than fifteen (15) percent of the annual appropriations 
made available to EDA to fund Public Works Investments may be made in 
any one (1) State.


Sec.  305.3  Application requirements.

    (a) Each application for Public Works Investment Assistance must:
    (1) Include evidence of eligibility, as provided in part 301 of 
this chapter;
    (2) Include, or incorporate by reference, a CEDS (as provided in 
Sec.  303.7 of this chapter);
    (3) Demonstrate how the proposed Project meets the criteria of 
Sec.  305.2; and
    (4) Demonstrate how the proposed Project meets the proposal 
evaluation criteria set forth in Sec.  301.8 of this chapter.
    (b) The Investment Rate for Public Works Investments will be 
determined in accordance with Sec.  301.4 of this chapter.


Sec.  305.4  Projects for design and engineering work.

    In the case of Public Works Investment Assistance awarded solely 
for design and engineering work, the following additional application 
requirements and terms shall apply:
    (a) EDA may determine that a separate Investment for design and 
engineering is warranted due to the technical complexity or 
environmental sensitivity of the construction Project;
    (b) The purpose of the Investment may be limited to the development 
and

[[Page 56688]]

production of all documents required for the construction of the 
proposed construction Project in a format and in sufficient quantity to 
permit advertisement and award of a construction contract soon after 
securing construction financing for the Project;
    (c) EDA will not disburse any portion of the Investment Assistance 
until it receives and certifies compliance with the Investment award of 
all design and engineering contracts; and
    (d) EDA's funding of the Project for design and engineering work 
does not in any way commit EDA to fund construction of the Project.

Subpart B--Requirements for Approved Projects


Sec.  305.5  Project administration by District Organization.

    (a) When a District Organization is not the Recipient or co-
Recipient of Investment Assistance, the District Organization may 
administer the Project for the Recipient if EDA determines fulfillment 
of the following conditions:
    (1) The Recipient has requested (either in the application or by 
separate written request) that the District Organization for the Region 
in which the Project is located administer the Project;
    (2) The Recipient certifies and EDA finds that:
    (i) Administration of the Project is beyond the capacity of the 
Recipient's current staff and would require hiring additional staff or 
contracting for such services;
    (ii) No local organization or business exists that could administer 
the Project in a more efficient or cost-effective manner than the staff 
of the District Organization; and
    (iii) The staff of the District Organization would administer the 
Project without sub-contracting the work; and
    (3) The allowable costs for the administration of the Project by 
the District Organization's staff will not exceed the amount that would 
be allowable to the Recipient.
    (b) EDA must approve the request either by approving the 
application in which the request is made or by separate specific 
written approval.


Sec.  305.6  Allowable methods of procurement for construction 
services.

    (a) Recipients may use alternate construction procurement methods 
to the traditional design/bid/build procedures (including lump sum or 
unit price-type construction contracts). These methods include but are 
not limited to design/bid/build, construction management at risk and 
force account. If an alternate method is used, the Recipient shall 
submit to EDA for approval a construction services procurement plan and 
the Recipient must use a design professional to oversee the process. 
The Recipient shall submit the plan to EDA prior to advertisement for 
bids and shall include the following, as applicable:
    (1) Justification for the proposed method for procurement of 
construction services;
    (2) The scope of work with cost estimates and schedules;
    (3) A copy of the proposed construction contract;
    (4) The name and qualifications of the selected design 
professional; and
    (5) Procedures to be used to ensure full and open competition, 
including the selection criteria.
    (b) For all procurement methods, the Recipient must comply with the 
procurement standards set forth in 15 CFR parts 14 or 24, as 
applicable.


Sec.  305.7  Services performed by the Recipient's own forces.

    In certain circumstances, the Recipient may wish to consider having 
a portion or all of the design, construction, inspection, legal 
services or other work and/or services in connection with the Project 
performed by personnel who are employed by the Recipient either full-
time or part-time. EDA may approve the use of such ``in-house forces'' 
if:
    (a) The services are routinely performed by the Recipient for all 
construction Projects performed by the Recipient (for example, 
inspection or legal); or
    (b) The Recipient has a special skill required for the construction 
of the Project (for example, construction of unique Indian structures); 
or
    (c) The Recipient has made all reasonable efforts to obtain a 
contractor but has failed to do so because of uncontrollable factors 
such as the remoteness of the Project site or an overabundance of 
construction work in the Region; or
    (d) The Recipient demonstrates substantial cost savings.


Sec.  305.8  Recipient-furnished equipment and materials.

    The Recipient may wish to incorporate into the Project equipment or 
materials that it will secure through its own efforts, subject to the 
following requirements:
    (a) EDA must approve any use of Recipient-furnished equipment and 
materials. EDA may require that major equipment items be subject to a 
lien in favor of EDA and may also require a statement from the 
Recipient regarding expected useful life and salvage value of such 
equipment;
    (b) EDA may require the Recipient to establish that the expense 
claimed for such equipment or materials is competitive with current 
local market costs; and
    (c) Acquisition of Recipient-furnished equipment and/or materials 
under this section is also subject to the requirements of 15 CFR parts 
14 or 24, as applicable.


Sec.  305.9  Project phasing and Investment disbursement.

    (a) EDA may authorize in advance the award of construction 
contracts in phases, provided the Recipient submits a request that 
includes each of the following:
    (1) Valid reasons justifying why the Project must be phased;
    (2) Description of the specific elements to be completed in each 
phase;
    (3) Detailed construction cost estimates for each phase;
    (4) Time schedules for completing all phases of the Project;
    (5) Certification that the Recipient can and will fund any 
overrun(s); and
    (6) Certification that the Recipient is capable of paying incurred 
costs prior to the first disbursement of EDA funds.
    (b) EDA will begin disbursement of funds after receipt of evidence 
sufficient to EDA of compliance with all Investment award conditions. 
EDA may approve the disbursement of funds prior to the tender of all 
construction contracts if the Recipient can demonstrate to EDA's 
satisfaction that a severe financial hardship will result without such 
approval.


Sec.  305.10  Bid underrun.

    If at the construction contract bid opening, the lowest responsive 
bid is less than the total Project cost, the Recipient will notify EDA 
to determine whether Investment funds should be deobligated from the 
Project.


Sec.  305.11  Contract awards; early construction start.

    EDA must determine that the award of all contracts necessary for 
design and construction of the Project facilities is in compliance with 
the terms and conditions of the Investment award in order for the costs 
to be eligible for EDA reimbursement. Pending this determination, the 
Recipient may issue a notice permitting construction under the contract 
to commence. If construction commences prior to EDA's determination, 
the Recipient proceeds at

[[Page 56689]]

its own risk until EDA review and concurrence. The EDA regional office 
will advise the Recipient of the requirements necessary to obtain EDA's 
determination.


Sec.  305.12  Project sign.

    The Recipient shall be responsible for the construction, erection 
and maintenance in good condition throughout the construction period of 
a sign or signs at a conspicuous place at the Project site indicating 
that the Federal government is participating in the Project. The EDA 
regional office will provide mandatory specifications for the signage.


Sec.  305.13  Contract change orders.

    (a) If it becomes necessary to alter the construction contracts 
post-execution, the Recipient and contractor shall agree to a formal 
contract change order.
    (b) All contract change orders must receive EDA review for 
compliance with the terms and conditions of the Investment award, even 
if the Recipient is to pay for all additional costs resulting from the 
change or the change order reduces the contract price.
    (c) Work on the Project may continue pending EDA review of the 
contract change order, but all such work will be at the Recipient's 
risk until EDA completes its review.


Sec.  305.14  Occupancy prior to completion.

    Occupancy of any part of the Project prior to final acceptance is 
entirely at the Recipient's risk and must follow the requirements of 
local and State law.

PART 306--TRAINING, RESEARCH AND TECHNICAL ASSISTANCE INVESTMENTS

Subpart A--Local and National Technical Assistance
Sec.
306.1 Purpose and scope.
306.2 Award requirements.
306.3 Application requirements.
Subpart B--University Center Economic Development Program
306.4 Purpose and scope.
306.5 Award requirements.
306.6 Application requirements.
306.7 Performance evaluations of University Centers.

    Authority: 42 U.S.C. 3147; 42 U.S.C. 3196; 42 U.S.C. 3211; 
Department of Commerce Organization Order 10-4.

Subpart A--Local and National Technical Assistance


Sec.  306.1  Purpose and scope.

    (a) Local and National Technical Assistance Investments may:
    (1) Determine the causes of excessive unemployment, 
underemployment, low per capita income, outmigration or other problems 
throughout the nation;
    (2) Formulate and implement economic development tools, models, and 
innovative techniques that will alleviate or prevent conditions of 
excessive unemployment or underemployment;
    (3) Formulate and implement economic development programs to 
increase local, regional and national capacity;
    (4) Evaluate the effectiveness and economic impact of programs, 
projects and techniques to alleviate economic distress and promote 
economic development;
    (5) Conduct project planning and feasibility studies;
    (6) Provide management and operational assistance;
    (7) Establish business outreach centers;
    (8) Disseminate information about effective programs, projects and 
techniques that alleviate conditions of economic distress and promote 
economic development;
    (9) Assess, market and establish business clusters and 
associations; or
    (10) Perform other activities determined by EDA to be appropriate 
under the Local and National Technical Assistance program.
    (b) Investment Assistance may not be used to start or expand a 
private business.
    (c) EDA may identify specific training, research or technical 
assistance Projects it will fund, which will be subject to competition. 
Ordinarily, these Projects are specified in an FFO, which will provide 
the specific requirements, timelines and the appropriate points of 
contact and addresses.
    (d) In providing Local and National Technical Assistance under this 
subpart, EDA, in addition to making Investments, may:
    (1) Provide Local and National Technical Assistance through 
officers or employees of the Department;
    (2) Pay funds made available to carry out this subpart to Federal 
Agencies; or
    (3) Employ private individuals, partnerships, businesses, 
corporations, or appropriate institutions under contracts entered into 
for this purpose.


Sec.  306.2  Award requirements.

    EDA selects Projects for Local and National Technical Assistance 
Investments in accordance with the general evaluation and selection 
criteria set forth in part 301 of this chapter and the extent to which 
the Project:
    (a) Strengthens the capacity of local, State or national 
organizations and institutions to undertake and promote effective 
economic development programs targeted to Regions of distress;
    (b) Benefits distressed Regions;
    (c) Demonstrates innovative approaches to stimulate economic 
development in distressed Regions;
    (d) Is consistent with an EDA-approved CEDS, as applicable, for the 
Region in which the Project is located; and
    (e) Meets the criteria outlined in the applicable FFO.


Sec.  306.3  Application requirements.

    (a) EDA will provide Investment Assistance under this subpart for 
the period of time required to complete the Project's scope of work, 
generally not to exceed twelve (12) to eighteen (18) months.
    (b) For a Project of significant Regional or national scope, EDA 
may waive the requirement set forth in Sec.  301.2(b) of this chapter 
that the non-profit organization act in cooperation with officials of a 
political subdivision of a State.
    (c) The Investment Rate for Investments under this subpart shall be 
determined in accordance with Sec.  301.4(b)(4) of this chapter.

Subpart B--University Center Economic Development Program


Sec.  306.4  Purpose and scope.

    The University Center Economic Development Program is intended to 
help improve the economies of distressed Regions. Institutions of 
higher education have many assets, such as faculty, staff, libraries, 
laboratories and computer systems that can address local economic 
problems and opportunities. With Investment Assistance, institutions of 
higher education establish and operate research centers (``University 
Centers'') that provide technical assistance to public and private 
sector organizations with the goal of enhancing local economic 
development.


Sec.  306.5  Award requirements.

    EDA provides Investment Assistance to University Center Projects in 
accordance with the general evaluation and selection criteria set forth 
in part 301 of this chapter, the competitive selection process outlined 
in the applicable FFO, and the extent to which the Project:
    (a) Addresses the economic development needs, issues and 
opportunities of the Region and will benefit distressed areas in the 
Region;
    (b) Provides service and value that are unique and will maximize 
coordination with other organizations in the Region;

[[Page 56690]]

    (c) Has the commitment and support (both financial and non-
financial) of the highest management levels of the sponsoring 
institution;
    (d) Outlines activities consistent with the expertise of the 
proposed staff, academic programs and other resources available within 
the sponsoring institution; and
    (e) Documents past experience of the sponsoring institution in 
operating technical assistance programs.


Sec.  306.6  Application requirements.

    (a) EDA will provide Investment Assistance under this subpart for 
the period of time required to complete the Project's scope of work, as 
specifically outlined in the applicable FFO.
    (b) For a Project of significant Regional or national scope, EDA 
may waive the requirement set forth in Sec.  301.2(b) of this chapter 
that the non-profit organization act in cooperation with officials of a 
political subdivision of a State.
    (c) The Investment Rate for Investments under this subpart shall be 
determined in accordance with Sec.  301.4(b)(4) of this chapter.
    (d) At least eighty (80) percent of EDA funding must be allocated 
to direct costs of program delivery.


Sec.  306.7  Performance evaluations of University Centers.

    (a) EDA will:
    (1) Evaluate each University Center within three (3) years after 
the initial Investment award and at least once every three (3) years 
thereafter, so long as such University Center continues to receive 
Investment Assistance; and
    (2) Assess the University Center's contribution to providing 
technical assistance, conducting applied research, meeting program 
performance objectives (as evidenced by retention and creation of 
employment opportunities) and disseminating Project results in 
accordance with the scope of work funded during the evaluation period.
    (b) The performance evaluation will determine in part whether a 
University Center can compete to receive Investment Assistance under 
the University Center Economic Development Program for the following 
Investment Assistance cycle.
    (c) For peer review, EDA shall ensure the participation of at least 
one (1) other University Center in the performance evaluation on a 
cost-reimbursement basis.

PART 307--ECONOMIC ADJUSTMENT ASSISTANCE INVESTMENTS

Subpart A--General
Sec.
307.1 Purpose.
307.2 Criteria for Economic Adjustment Assistance Investments.
307.3 Use of Economic Adjustment Assistance Investments.
307.4 Award requirements.
307.5 Application requirements.
307.6 Economic Adjustment Assistance post-approval requirements.
Subpart B--Special Requirements for Revolving Loan Funds and Use of 
Grant Funds
307.7 Revolving Loan Funds established for business lending.
307.8 Definitions.
307.9 Revolving Loan Fund Plan.
307.10 Pre-loan requirements.
307.11 Disbursement of funds to Revolving Loan Funds.
307.12 Revolving Loan Fund Income.
307.13 Records and retention.
307.14 Revolving Loan Fund semi-annual and annual reports.
307.15 Prudent management of Revolving Loan Funds.
307.16 Effective utilization of Revolving Loan Funds.
307.17 Uses of capital.
307.18 Addition of lending areas; merger of RLFs.
307.19 RLF loan portfolio Sales and Securitizations.
307.20 Partial liquidation and liquidation upon termination.
307.21 Termination of Revolving Loan Funds.
307.22 Variances.

    Authority: 42 U.S.C. 3211; 42 U.S.C. 3149; 42 U.S.C. 3161; 42 
U.S.C. 3162; 42 U.S.C. 3233; Department of Commerce Organization 
Order 10-4.

Subpart A--General


Sec.  307.1  Purpose.

    The purpose of Economic Adjustment Assistance Investments is to 
address the needs of communities experiencing adverse economic changes 
that may occur suddenly or over time, including but not limited to 
those caused by:
    (a) Military base closures or realignments, defense contractor 
reductions in force, or U.S. Department of Energy defense-related 
funding reductions;
    (b) Federally-Declared Disasters;
    (c) International trade;
    (d) Long-term economic deterioration;
    (e) Loss of a major community employer; or
    (f) Loss of manufacturing jobs.


Sec.  307.2  Criteria for Economic Adjustment Assistance Investments.

    (a) Economic Adjustment Assistance Investments are intended to 
enhance a distressed community's ability to compete economically by 
stimulating private investment in targeted economic sectors through use 
of tools that:
    (1) Help develop and implement a CEDS;
    (2) Expand the capacity of public officials and economic 
development organizations to work effectively with businesses;
    (3) Assist in overcoming major obstacles identified in the CEDS;
    (4) Enable communities to plan and coordinate the use of Federal 
resources and other resources available to support economic recovery, 
development of Regional economies, or recovery from natural or other 
disasters; or
    (5) Encourage the development of innovative public and private 
approaches to economic restructuring and revitalization.
    (b) Economic Adjustment Assistance Investments may be made when the 
Project funded by the Investment will help the Region meet a Special 
Need. The Region in which a Project is located must have a CEDS with 
which the Project is consistent (except that this requirement shall not 
apply to Strategy Grants described in Sec.  307.3).


Sec.  307.3  Use of Economic Adjustment Assistance Investments.

    Economic Adjustment Assistance Investments may be used to develop a 
CEDS to alleviate long-term economic deterioration or a sudden and 
severe economic dislocation (a ``Strategy Grant''), or to fund a 
Project implementing such a CEDS (an ``Implementation Grant'').
    (a) Strategy Grants support developing, updating or refining a 
CEDS.
    (b) Implementation Grants support the execution of activities 
identified in a CEDS. Specific activities may be funded as separate 
Investments or as multiple elements of a single Investment. Examples of 
Implementation Grant activities include:
    (1) Infrastructure improvements, such as site acquisition, site 
preparation, construction, rehabilitation and equipping of facilities;
    (2) Provision of business or infrastructure financing through the 
capitalization of Recipient-administered Revolving Loan Funds 
(``RLFs''), which may include loans, loan guaranties and interest rate 
buy-downs to facilitate business lending activities;
    (3) Market or industry research and analysis;
    (4) Technical assistance, including organizational development such 
as business networking, restructuring or improving the delivery of 
business services, or feasibility studies;
    (5) Public services;
    (6) Training; and
    (7) Other activities justified by the CEDS that satisfy applicable 
statutory and regulatory requirements.

[[Page 56691]]

Sec.  307.4  Award requirements.

    (a) General. EDA will select Economic Adjustment Assistance 
Projects in accordance with part 301 of this chapter and the additional 
criteria provided in paragraphs (b) and (c) of this section, as 
applicable.
    (b) Strategy Grants. EDA will review Strategy Grant proposals to 
ensure that the proposed activities conform to the CEDS requirements 
set forth in Sec.  303.7 of this chapter.
    (c) Implementation Grants.
    (1) EDA will review Implementation Grant proposals for the extent 
to which:
    (i) The applicable CEDS meets the requirements in Sec.  303.7 of 
this chapter; and
    (ii) The proposed Project is identified as a necessary element of 
or consistent with the applicable CEDS.
    (2) Revolving Loan Fund Grants. For Eligible Applicants seeking to 
capitalize or recapitalize an RLF, EDA will review the proposals for:
    (i) The need for a new or expanded public financing tool to enhance 
other business assistance programs and services targeting economic 
sectors and locations described in the CEDS;
    (ii) The types of financing activities anticipated; and
    (iii) The capacity of the RLF organization to manage lending 
activities, create networks between the business community and other 
financial providers, and implement the CEDS.
    (d) Funding priority considerations for Economic Adjustment 
Assistance may be set forth in an FFO.


Sec.  307.5  Application requirements.

    (a) Each application for Economic Adjustment Assistance must:
    (1) Include or incorporate by reference (if so approved by EDA) a 
CEDS, except that a CEDS is not required when applying for a Strategy 
Grant; and
    (2) Explain how the proposed Project meets the criteria set forth 
in Sec.  307.2.
    (b) For a technical assistance Project of significant Regional or 
national scope under this subpart, EDA may waive the requirement set 
forth in Sec.  301.2(b) of this chapter that the non-profit 
organization act in cooperation with officials of a political 
subdivision of a State.


Sec.  307.6  Economic Adjustment Assistance post-approval requirements.

    In addition to the post-approval requirements set forth in Sec.  
302.18 of this chapter:
    (a) Strategy Grants shall comply with the applicable provisions of 
part 303 of this chapter;
    (b) Implementation Grants involving construction shall comply with 
the provisions of subpart B of part 305 of this chapter;
    (c) Implementation Grants not involving construction shall comply 
with the applicable provisions of subpart A of part 306 of this 
chapter; and
    (d) RLF Grants shall comply with the requirements set forth in this 
part and in the following publications:
    (1) EDA's RLF Standard Terms and Conditions; and
    (2) The compliance supplement to OMB Circular A-133 (the 
``Compliance Supplement''). The Compliance Supplement is available via 
the Internet at http://www.omb.gov.

Subpart B--Special Requirements for Revolving Loan Funds and Use of 
Grant Funds


Sec.  307.7  Revolving Loan Funds established for business lending.

    Economic Adjustment Assistance Grants to capitalize or recapitalize 
RLFs most commonly fund business lending, but may also fund public 
infrastructure or other authorized lending activities. The requirements 
in this subpart B apply to RLFs established for business lending 
activities. Special award conditions may contain appropriate 
modifications of these requirements to accommodate non-business RLF 
awards.


Sec.  307.8  Definitions.

    In addition to the defined terms set forth in Sec.  300.3 of this 
chapter, the following terms used in this part shall have the following 
meanings:
    Closed Loan means any loan for which all required documentation has 
been, received, reviewed and executed by an RLF Recipient.
    Exempt Security means a Security that is not subject to certain SEC 
or Federal Reserve Board rules.
    Guaranteed Loan means a loan made and serviced by a third party 
lending institution under a loan guaranty agreement providing that an 
RLF Recipient will purchase the guaranteed portion of the loan in the 
event of borrower default.
    Prudent Lending Practices means generally accepted underwriting and 
lending practices for public loan programs, based on sound judgment to 
protect Federal and lender interests. Prudent Lending Practices include 
loan processing, documentation, loan approval, collections, servicing, 
administrative procedures, collateral protection and recovery actions. 
Prudent Lending Practices provide for compliance with local laws and 
filing requirements to perfect and maintain a security interest in RLF 
collateral.
    Recapitalization Grants are Investments of additional Grant funds 
to increase the capital base of an RLF.
    Revolving Phase means that stage of the RLF's business lending 
activities that commences immediately after all Grant funds have been 
disbursed to the RLF Recipient.
    RLF Capital means, at any point in time, the aggregate amount of 
cash held by the RLF Recipient from any of the following sources: Grant 
funds; Local Share; repayments of principal from RLF loans; and RLF 
Income. The initial RLF capital base is normally comprised of EDA funds 
and the cash Local Share.
    RLF Income means interest earned on outstanding loan principal and 
RLF accounts holding RLF funds (excluding interest earned on excess 
funds pursuant to Sec.  307.16(c)(2)), all fees and charges received by 
the RLF, and other income generated from RLF operations. An RLF 
Recipient may use RLF Income only to capitalize the RLF for financing 
activities and to cover eligible and reasonable costs necessary to 
administer the RLF, unless otherwise provided for in the Grant 
agreement or approved in writing by EDA. RLF Income excludes repayments 
of principal and any interest remitted to the U.S. Treasury pursuant to 
Sec.  307.16(c)(2)(i).
    RLF Third Party, for purposes of this subpart B only, means an 
Eligible Recipient or for-profit entity selected by EDA through a 
request for proposals or Cooperative Agreement to facilitate and/or 
manage the intended liquidation of an RLF.
    Sale means an EDA-approved sale by an RLF Recipient of its RLF loan 
portfolio (or a portion thereof) to a third party. A third party may 
participate in a subsequent Securitization offered in a secondary 
market transaction and collateralized by the underlying RLF loan 
portfolio (or a portion thereof).
    SEC or the Commission means the U.S. Securities and Exchange 
Commission.
    Securitization refers to the financing technique of securing an 
investment of new capital with a stream of income generated by 
aggregating similar instruments such as loans or mortgages into a new 
transferable Security.
    Security means any investment instrument issued by a corporation, 
government or other organization which offers evidence of debt or 
equity.


Sec.  307.9  Revolving Loan Fund Plan.

    All RLF Recipients shall manage RLFs in accordance with an RLF plan 
(the ``RLF Plan'' or ``Plan'') as described in this section. The Plan 
shall be submitted to and approved by EDA.
    (a) Format and content.

[[Page 56692]]

    (1) Part I of the Plan titled ``Revolving Loan Fund Strategy'' 
shall summarize the CEDS and business development objectives and shall 
describe the RLF's financing strategy, policy and portfolio standards.
    (2) Part II of the Plan titled ``Operational Procedures'' shall 
serve as the internal operating manual for the RLF Recipient. The 
administrative procedures for operating the RLF must be consistent with 
Prudent Lending Practices.
    (b) Evaluation of RLF Plans. EDA will use the following criteria in 
evaluating Plans:
    (1) The Plan must be consistent with the CEDS or EDA-approved 
strategy for the Region;
    (2) The Plan must identify the strategic purpose of the RLF and 
must describe the selection of the financing strategy and lending 
criteria, including:
    (i) An analysis of the local capital market and the financing needs 
of the targeted businesses; and
    (ii) Financing policies and portfolio standards that are consistent 
with EDA policies and requirements; and
    (3) The Plan must demonstrate an adequate understanding of 
commercial loan portfolio management procedures, including loan 
processing, underwriting, closing, disbursements, collections, 
monitoring, and foreclosures. It shall also provide sufficient 
administrative procedures to prevent conflicts of interest and to 
ensure accountability, safeguarding of assets and compliance with 
Federal and local laws.
    (c) Modification of RLF Plans. An RLF Recipient must request and 
obtain EDA approval prior to any modification of the Plan.


Sec.  307.10  Pre-loan requirements.

    (a) RLF Recipients must adopt procedures to review the impacts of 
prospective loan proposals on the physical environment. The Plan must 
provide for compliance with applicable environmental laws and other 
regulations, including but not limited to parts 302 and 314 of this 
chapter. The RLF Recipient must also adopt procedures to comply, and 
ensure that potential borrowers comply, with applicable environmental 
laws and regulations.
    (b) RLF Recipients must ensure that prospective borrowers, 
consultants, or contractors are aware of and comply with the Federal 
statutory and regulatory requirements that apply to activities carried 
out with RLF loans. RLF loan agreements shall include applicable 
Federal requirements to ensure compliance and RLF Recipients must adopt 
procedures to diligently correct instances of non-compliance, including 
loan call stipulations.
    (c) All RLF loan documents and procedures must protect and hold the 
Federal government harmless from and against all liabilities that the 
Federal government may incur as a result of providing an RLF Grant to 
assist directly or indirectly in site preparation or construction, as 
well as the direct or indirect renovation or repair of any facility or 
site. These protections apply to the extent that the Federal government 
may become potentially liable as a result of ground water, surface, 
soil or other natural or man-made conditions on the property caused by 
operations of the RLF Recipient or any of its borrowers, predecessors 
or successors.


Sec.  307.11  Disbursement of funds to Revolving Loan Funds.

    (a) Pre-disbursement requirements. Prior to any disbursement of EDA 
funds, RLF Recipients are required to provide in a form acceptable to 
EDA:
    (1) Evidence of fidelity bond coverage for persons authorized to 
handle funds under the Grant award in an amount sufficient to protect 
the interests of EDA and the RLF. Such insurance coverage must exist at 
all times during the duration of the RLF's operation; and
    (2) Evidence of certification in accordance with Sec.  
307.15(b)(1).
    (b) Timing of request for disbursements. An RLF Recipient shall 
request disbursements of Grant funds only to close a loan or disburse 
RLF funds to a borrower. The RLF Recipient must disburse the RLF funds 
to a borrower within thirty (30) days of receipt of the Grant funds. 
Any Grant funds not disbursed within the thirty (30) day period shall 
be refunded to EDA pursuant to paragraph (e) of this section.
    (c) Amount of disbursement. The amount of a disbursement of Grant 
funds shall not exceed the difference, if any, between the RLF Capital 
and the amount of a new RLF loan, less the amount, if any, of the Local 
Share required to be disbursed concurrent with the Grant funds. 
However, RLF Income held to reimburse eligible administrative costs 
need not be disbursed in order to draw additional Grant funds.
    (d) EDA funds account. The RLF Recipient shall establish and 
maintain an interest-bearing account designated as the ``EDA funds 
account,'' indicating that monies deposited therein are held for 
funding approved Closed Loans. The RLF Recipient shall withdraw funds 
or order a transfer from the EDA funds account for lending to eligible 
borrowers or return of funds to EDA.
    (e) Delays. If the RLF Recipient receives Grant funds and the RLF 
loan disbursement is subsequently delayed beyond thirty (30) days, the 
RLF Recipient must notify the applicable grants officer and return such 
non-disbursed funds to EDA. Grant funds returned to EDA shall be 
available to the RLF Recipient for future draw-downs. When returning 
prematurely drawn Grant funds, the RLF Recipient must clearly identify 
on the face of the check or in the written notification to the 
applicable grants officer ``EDA,'' the Grant award number, the words 
``Premature Draw,'' and a brief description of the reason for returning 
the Grant funds.
    (f) Local Share.
    (1) Cash Local Share of the RLF may only be used for lending 
purposes. The cash Local Share must be used either in proportion to the 
Grant funds or at a faster rate than the Grant funds.
    (2) When an RLF has a combination of In-Kind Contributions and cash 
Local Share, the cash Local Share and the Grant funds will be disbursed 
proportionately as needed for lending activities, provided that the 
last twenty (20) percent of the Grant funds may not be disbursed until 
all cash Local Share has been expended. The full amount of the cash 
Local Share shall remain for use in the RLF.


Sec.  307.12  Revolving Loan Fund Income.

    (a) General requirements. RLF Income must be placed into the RLF 
Capital base for the purpose of making loans or paying for eligible and 
reasonable administrative costs associated with the RLF's operations. 
RLF Income may fund administrative costs, provided:
    (1) Such RLF Income and the administrative costs are incurred in 
the same twelve-month (12) reporting period;
    (2) RLF Income that is not used for administrative costs during the 
twelve-month (12) reporting period is made available for lending 
activities;
    (3) RLF Income shall not be withdrawn from the RLF Capital base in 
a subsequent reporting period for any purpose other than lending 
without the prior written consent of EDA; and
    (4) The RLF Recipient completes an RLF Income and Expense Statement 
(the ``Income and Expense Statement'') as required under Sec.  
307.14(c).
    (b) Compliance guidelines. When charging costs against RLF Income, 
RLF Recipients must comply with applicable OMB cost principles and RLF 
audit guidelines as found in:

[[Page 56693]]

    (1) OMB Circular A-87 for State, local, and Indian tribal 
governments, OMB Circular A-122 for non-profit organizations other than 
institutions of higher education, hospitals or organizations named in 
OMB Circular A-122 as not subject to such circular, and OMB Circular A-
21 for educational institutions; and
    (2) OMB Circular A-133 for Single Audit Act requirements for 
States, local governments, and non-profit organizations and the 
Compliance Supplement, as appropriate.
    (c) Priority of payments on defaulted RLF loans. When an RLF 
Recipient receives proceeds on a defaulted RLF loan that is not subject 
to liquidation pursuant to Sec.  307.20, such proceeds shall be applied 
in the following order of priority:
    (1) First, towards any costs of collection;
    (2) Second, towards outstanding penalties and fees;
    (3) Third, towards any accrued interest to the extent due and 
payable; and
    (4) Fourth, towards any outstanding principal balance.


Sec.  307.13  Records and retention.

    (a) Closed Loan files and related documents. The RLF Recipient 
shall maintain Closed Loan files and all related documents, books of 
account, computer data files and other records over the term of the 
Closed Loan and for a three-year (3) period from the date of final 
disposition of such Closed Loan. The date of final disposition of a 
Closed Loan is the date:
    (1) Principal, interest, fees, penalties and all other costs 
associated with the Closed Loan have been paid in full; or
    (2) Final settlement or discharge and cessation of collection 
efforts of any unpaid amounts associated with the Closed Loan have 
occurred.
    (b) Administrative records. RLF Recipients must at all times:
    (1) Maintain adequate accounting records and source documentation 
to substantiate the amount and percent of RLF Income expended for 
eligible RLF administrative costs.
    (2) Retain records of administrative expenses incurred for 
activities and equipment relating to the operation of the RLF for three 
(3) years from the actual submission date of the last semi-annual or 
annual report that covers the period that such costs were claimed, or 
for five (5) years from the date the costs were claimed, whichever is 
less.
    (3) Make available for inspection retained records, including those 
retained for longer than the required period. The record retention 
periods described in this section are minimum periods and such 
prescription does not limit any other record retention requirement of 
law or agreement. In no event will EDA question claimed administrative 
costs that are more than three (3) years old, unless fraud is at issue.


Sec.  307.14  Revolving Loan Fund semi-annual and annual reports.

    (a) Frequency of reports. All RLF Recipients, including those 
receiving Recapitalization Grants for existing RLFs, must submit semi-
annual reports. EDA may approve the substitution of annual reports for 
semi-annual reports upon written request by the Recipient if the 
following conditions have been met:
    (1) At least one (1) year has passed from the date that the RLF has 
loaned an aggregate amount equal to its initial RLF Capital base;
    (2) The RLF Recipient has timely submitted accurate semi-annual 
reports for the preceding two (2) years;
    (3) The RLF Recipient has ensured completion and submission to EDA 
of required periodic audits for the most recent audit period within the 
preceding two (2) years; and
    (4) EDA determines that the RLF is in compliance with all 
applicable RLF requirements.
    (b) Report contents. RLF Recipients must certify as part of the 
semi-annual or annual report to EDA that the RLF is operating in 
accordance with the applicable RLF Plan. RLF Recipients must also 
describe (and propose pursuant to Sec.  307.9) any modifications to the 
RLF Plan to ensure effective use of the RLF as a strategic financing 
tool.
    (c) RLF Income and Expense Statement.
    (1) An RLF Recipient using either fifty (50) percent or more (or 
more than $100,000) of RLF Income for administrative costs in the 
twelve-month (12) reporting period must submit a completed Income and 
Expense Statement annually to the appropriate regional office within 
ninety (90) days of the end of its fiscal year. An RLF Recipient using 
less than fifty (50) percent and less than $100,000 of RLF Income for 
administrative costs in the twelve-month (12) reporting period must 
prepare and retain for four (4) years a completed Income and Expense 
Statement for the applicable fiscal year, which shall be made available 
to EDA upon request.
    (2) Performance measures. As part of the semi-annual or annual 
report, RLF Recipients shall submit to EDA the information identified 
as the ``Core Performance Measures'' in the special award conditions of 
the Grant documents. EDA will advise RLF Recipients within a reasonable 
time of any required modifications to the information submitted.


Sec.  307.15  Prudent management of Revolving Loan Funds.

    (a) Accounting principles.
    (1) RLFs shall operate in accordance with generally accepted 
accounting principles (``GAAP'') as in effect from time to time in the 
United States and the provisions outlined in OMB Circular A-133 and the 
Compliance Supplement, as applicable.
    (2) In accordance with GAAP, a loan loss reserve may be recorded in 
the RLF Recipient's financial statements to show the fair market value 
of an RLF's loan portfolio, provided this loan loss reserve is non-
funded and represents non-cash entries.
    (b) Loan and accounting system documents.
    (1) Within sixty (60) days prior to the initial disbursement of EDA 
funds, an independent accountant familiar with the RLF Recipient's 
accounting system shall certify to EDA and the RLF Recipient that such 
system is adequate to identify, safeguard and account for all RLF 
Capital, outstanding RLF loans and other RLF operations.
    (2) Prior to the disbursement of any EDA funds, the RLF Recipient 
shall certify that standard RLF loan documents reasonably necessary or 
advisable for lending are in place and that these documents have been 
reviewed by its legal counsel for adequacy and compliance with the 
terms and conditions of the Grant and applicable State and local law. 
The standard loan documents must include, at a minimum, the following:
    (i) Loan application;
    (ii) Loan agreement;
    (iii) Promissory note;
    (iv) Security agreement(s);
    (v) Deed of trust or mortgage (as applicable);
    (vi) Agreement of prior lien holder (as applicable); and
    (vii) Guaranty agreement (as applicable).
    (c) Interest rates. An RLF Recipient may make loans and may 
guarantee loans to eligible borrowers at interest rates and under 
conditions determined by the RLF Recipient to be appropriate in 
achieving the goals of the RLF. However, the minimum interest rate an 
RLF can charge is four (4) percentage points below the lesser of the 
current money center prime interest rate quoted in the Wall Street 
Journal, or the maximum interest rate allowed under State law. In no 
event shall the interest rate be less than four (4) percent.

[[Page 56694]]

However, should the prime interest rate listed in the Wall Street 
Journal exceed fourteen (14) percent, the minimum RLF interest rate is 
not required to be raised above ten (10) percent if doing so 
compromises the ability of the RLF Recipient to implement its financing 
strategy.
    (d) Private leveraging. (1) RLF loans must leverage private 
investment of at least two dollars for every one dollar of such RLF 
loans. This leveraging requirement applies to the RLF portfolio as a 
whole rather than to individual loans and is effective for the duration 
of the RLF's operation. To be classified as leveraged, private 
investment must be made within twelve (12) months prior to approval of 
an RLF loan, as part of the same business development Project, and may 
include:
    (i) Capital invested by the borrower or others;
    (ii) Financing from private entities; or
    (iii) The non-guaranteed portions and ninety (90) percent of the 
guaranteed portions of the U.S. Small Business Administration's 7(A) 
loans and 504 debenture loans.
    (2) Private investments shall not include accrued equity in a 
borrower's assets.


Sec.  307.16  Effective utilization of Revolving Loan Funds.

    (a) Loan closing and disbursement schedule.
    (1) RLF loan activity must be sufficient to draw down Grant funds 
in accordance with the schedule prescribed in the award conditions for 
loan closings and disbursements to eligible RLF borrowers. The schedule 
usually requires that the RLF Recipient lend the entire amount of the 
initial RLF Capital base within three (3) years of the Grant award.
    (2) If an RLF Recipient fails to meet the prescribed lending 
schedule, EDA may de-obligate the non-disbursed balance of the RLF 
Grant. EDA may allow exceptions where:
    (i) Closed Loans approved prior to the schedule deadline will 
commence and complete disbursements within forty-five (45) days of the 
deadline;
    (ii) Closed Loans have commenced (but not completed) disbursement 
obligations prior to the deadline; or
    (iii) EDA has approved a time schedule extension pursuant to Sec.  
307.16(b).
    (b) Time schedule extensions.
    (1) RLF Recipients shall promptly inform EDA in writing of any 
condition that may adversely affect their ability to meet the 
prescribed schedule deadlines. RLF Recipients must submit a written 
request to EDA for continued use of Grant funds beyond a missed 
deadline for disbursement of RLF funds. RLF Recipients must provide 
good reason for the delay in their extension requests by demonstrating 
that:
    (i) The delay was unforeseen or beyond the control of the RLF 
Recipient;
    (ii) The financial need for the RLF still exists;
    (iii) The current and planned use and the anticipated benefits of 
the RLF will remain consistent with the current CEDS and the RLF Plan; 
and
    (iv) The proposal of a revised time schedule is reasonable. An 
extension request must also provide an explanation as to why no further 
delays are anticipated.
    (2) EDA is under no obligation to grant a time extension and in the 
event an extension is denied, EDA may deobligate all or part of the 
unused Grant funds and terminate the Grant.
    (c) Capital utilization standard.
    (1) During the Revolving Phase, RLF Recipients must manage their 
repayment and lending schedules to provide that at all times at least 
seventy-five (75) percent of the RLF Capital is loaned or committed. 
The following exceptions apply:
    (i) An RLF Recipient that anticipates making large loans relative 
to the size of its RLF Capital base may propose a Plan that provides 
for maintaining a capital utilization percentage greater than twenty-
five (25) percent; and
    (ii) EDA may require an RLF Recipient with an RLF Capital base in 
excess of $4 million to adopt a Plan that maintains a proportionately 
higher percentage of its funds loaned.
    (2) When the percentage of loaned RLF Capital falls below the 
applicable capital utilization percentage, the dollar amount of the RLF 
funds equivalent to the difference between the actual percentage of RLF 
Capital loaned and the applicable capital utilization percentage is 
referred to as ``excess funds.''
    (i) Sequestration of excess funds. If the RLF Recipient fails to 
satisfy the applicable capital utilization percentage requirement for 
two (2) consecutive reporting intervals, EDA may require the RLF 
Recipient to deposit excess funds in an interest-bearing account 
separate from the EDA funds account. The portion of interest earned on 
the account holding excess funds attributable to the RLF Grant shall be 
remitted to the U.S. Treasury. RLF Recipients must obtain EDA's written 
authorization to withdraw any sequestered funds.
    (ii) Persistent non-compliance. An RLF Recipient will generally be 
allowed a reasonable period of time to lend excess funds and achieve 
the applicable capital utilization percentage. However, if an RLF 
Recipient fails to achieve the applicable capital utilization 
percentage after a reasonable period of time, as determined by EDA, it 
may be subject to sanctions such as suspension or termination.


Sec.  307.17  Uses of capital.

    (a) General. RLF Capital shall be used for the purpose of making 
RLF loans that are consistent with an RLF Plan or such other purposes 
approved by EDA. To ensure that RLF funds are used as intended, each 
loan agreement must clearly state the purpose of each loan.
    (b) Restrictions on use of RLF Capital. RLF Capital shall not be 
used to:
    (1) Acquire an equity position in a private business;
    (2) Subsidize interest payments on an existing RLF loan;
    (3) Provide for borrowers' required equity contributions under 
other Federal Agencies' loan programs;
    (4) Enable borrowers to acquire an interest in a business either 
through the purchase of stock or through the acquisition of assets, 
unless sufficient justification is provided in the loan documentation. 
Sufficient justification may include acquiring a business to save it 
from imminent closure or to acquire a business to facilitate a 
significant expansion or increase in investment with a significant 
increase in jobs. The potential economic benefits must be clearly 
consistent with the strategic objectives of the RLF;
    (5) Provide RLF loans to a borrower for the purpose of investing in 
interest-bearing accounts, certificates of deposit or any investment 
unrelated to the RLF; or
    (6) Refinance existing debt, unless:
    (i) The RLF Recipient sufficiently demonstrates in the loan 
documentation a ``sound economic justification'' for the refinancing 
(e.g., the refinancing will support additional capital investment 
intended to increase business activities). For this purpose, reducing 
the risk of loss to an existing lender(s) or lowering the cost of 
financing to a borrower shall not, without other indicia, constitute a 
sound economic justification; or
    (ii) RLF Capital will finance the purchase of the rights of a prior 
lien holder during a foreclosure action which is necessary to preclude 
a significant loss on an RLF loan. RLF Capital may be used for this 
purpose only if there is a high probability of receiving compensation 
from the sale of assets sufficient to cover an RLF's costs plus a 
reasonable portion of the outstanding RLF loan within eighteen

[[Page 56695]]

(18) months following the date of refinancing;
    (c) Credit not otherwise available. RLF Recipients must determine 
and clearly demonstrate in the loan documentation for each RLF loan 
that credit is not otherwise available on terms and conditions that 
permit the completion or successful operation of the activity to be 
financed.
    (d) Use of In-Kind Contributions. In-Kind Contributions may satisfy 
Matching Share requirements when specifically authorized in the terms 
and provisions of the RLF Grant and may be used to provide technical 
assistance to borrowers or for eligible RLF administrative costs.
    (e) Loan guaranty agreements. Prior to the full disbursement of 
Grant funds, the RLF Recipient shall not use RLF Capital to guarantee 
loans made by other lending institutions. After the full disbursement 
of Grant funds, RLF Capital may be used to guarantee loans of private 
lenders, provided the RLF Recipient has obtained prior written approval 
from EDA of its proposed loan guaranty activities and submitted to EDA:
    (1) The maximum guaranty percentage offered by the RLF Recipient 
and accepted by the lender;
    (2) The loan guaranty agreement which must (at a minimum) document:
    (i) The RLF Recipient's maximum liability;
    (ii) The respective rights, representations and obligations of the 
RLF Recipient and lender with regard to collection procedures, 
servicing requirements, borrower delinquency, events of defaults and 
termination of the loan guaranty agreement;
    (iii) The responsible party's obligations in the event of any 
foreclosure, bankruptcy or insolvency proceeding;
    (iv) The responsible party's obligations with respect to collateral 
disposition and the call provisions for the Guaranteed Loan; and
    (v) The distribution of interest income and loan fees, if any, to 
the RLF; and
    (3) Certification from the RLF Recipient's legal counsel that the 
loan guaranty agreement is valid and enforceable under applicable State 
law; and
    (4) An amended RLF Plan accommodating the loan guaranty activities 
approved by EDA (as necessary).


Sec.  307.18  Addition of lending areas; merger of RLFs.

    (a)(1) Addition of Lending Areas. An RLF Recipient shall make loans 
to implement and assist economic activity only within its EDA-approved 
lending area, as set forth and defined in the RLF Grant and the Plan. 
An RLF Recipient may add an additional lending area (an ``Additional 
Lending Area'') to its existing lending area to create a new merged 
lending area (the ``New Lending Area'') only with EDA's prior written 
approval and subject to the following provisions and conditions:
    (i) EDA shall have disbursed the full amount of its Investment 
Assistance to the RLF Recipient;
    (ii) The Additional Lending Area must fulfill the economic distress 
criteria for Economic Adjustment Investments under this part and in 
accordance with Sec.  301.3(a) of this chapter;
    (iii) Prior to EDA's disbursement of additional funds to the RLF 
Recipient (for example, through a recapitalization), EDA shall 
determine a new Investment Rate for the New Lending Area based on the 
criteria set forth in Sec.  301.4 of this chapter;
    (iv) The RLF Recipient must demonstrate that the Additional Lending 
Area is consistent with its CEDS, or modify its CEDS for any such 
Additional Lending Area, in accordance with Sec.  307.9(b)(1);
    (v) The RLF Recipient shall modify its Plan to incorporate the 
Additional Lending Area and revise its lending strategy, as necessary;
    (vi) The RLF Recipient shall execute an amended RLF Grant award 
agreement, as necessary; and
    (vii) The RLF Recipient fulfills any other conditions reasonably 
requested by EDA.
    (2) The New Lending Area designation shall remain in place 
indefinitely following EDA approval.
    (b) Merger of RLFs.
    (1) Single RLF Recipient. An RLF Recipient with more than one (1) 
EDA-funded RLF Grant may consolidate two (2) or more EDA-funded RLFs 
into one (1) surviving RLF with EDA's prior written approval and 
provided:
    (i) It meets the requirements to obtain annual report status 
identified in paragraphs (a)(2) through (a)(4) of Sec.  307.14;
    (ii) It demonstrates a rational basis for undertaking the merger 
(for example, the lending area(s) and borrower criteria identified in 
different RLF Plans are compatible, or will be compatible, for all RLFs 
to be consolidated);
    (iii) It amends and consolidates its Plan to account for the merger 
of RLFs, including items such as the New Lending Area (including any 
Additional Lending Area(s)), its lending strategy and borrower 
criteria;
    (iv) Prior to EDA's disbursement of additional funds to the RLF 
Recipient (for example, through a recapitalization), EDA shall 
determine a new Investment Rate for the New Lending Area based on the 
criteria set forth in Sec.  301.4 of this chapter; and
    (v) The RLF Recipient fulfills any other conditions reasonably 
requested by EDA.
    (2) Multiple RLF Recipients. Two (2) or more RLF Recipients may 
consolidate their EDA-funded RLFs into one (1) surviving RLF with EDA's 
prior written approval and provided:
    (i) The surviving RLF Recipient meets the requirements to obtain 
annual report status identified in paragraphs (a)(2) through (a)(4) of 
Sec.  307.14;
    (ii) The surviving RLF Recipient amends and consolidates its Plan 
to account for the merger of RLFs, including items such as the New 
Lending Area (including any Additional Lending Area(s)), its lending 
strategy and borrower criteria;
    (iii) Prior to EDA's disbursement of additional funds to the 
surviving RLF Recipient (for example, through a recapitalization), EDA 
shall determine a new Investment Rate for the New Lending Area based on 
the criteria set forth in Sec.  301.4 of this chapter;
    (iv) EDA must provide written approval of the merger agreement(s), 
modifications and revisions to the Plans and any other related 
amendments thereto;
    (v) All applicable RLF Grant assets of the discharging RLF 
Recipient(s) transfer to the surviving RLF Recipient as of the merger's 
effective date; and
    (vi) The surviving RLF Recipient becomes fully responsible for 
administration of the RLF Grant assets transferred and fulfills all 
surviving RLF Grant requirements and any other conditions reasonably 
requested by EDA.


Sec.  307.19  RLF loan portfolio Sales and Securitizations.

    EDA may take such actions as appropriate to enable an RLF Recipient 
to sell or securitize RLF loans, except that EDA may not issue a 
Federal guaranty covering any issued Security. With prior approval from 
EDA, an RLF Recipient may enter into a Sale or a Securitization of all 
or a portion of its RLF loan portfolio, provided:
    (a) An RLF Recipient must use all proceeds from any Sale or 
Securitization (net of reasonable transaction costs) to make additional 
RLF loans;
    (b) An RLF Recipient must request EDA to subordinate its interest 
in all or a portion of any RLF loan portfolio sold or securitized;

[[Page 56696]]

    (c) No Security collateralized by RLF loans and other RLF property 
and offered in a secondary market transaction pursuant to a 
Securitization shall be treated as an Exempt Security for purposes of 
the Securities Act of 1933, as amended (15 U.S.C. 77a et seq.), or the 
Securities Exchange Act of 1934, as amended (15 U.S.C. 78a et seq.) 
(the ``Exchange Act''), unless exempted by a rule or regulation issued 
by the Commission; and
    (d) Except as provided in paragraph (c), no provision of this 
section supersedes or otherwise affects the application of the 
``securities laws'' (as such term is defined in section 3(a)(47) of the 
Exchange Act) or the rules, regulations or orders issued by the 
Commission or a self-regulatory organization under the Commission.


Sec.  307.20  Partial liquidation and liquidation upon termination.

    (a) Partial liquidation. EDA may require an RLF Recipient to 
transfer any RLF loans that are more than one hundred and twenty (120) 
days delinquent to an RLF Third Party for liquidation.
    (b) Liquidation upon termination. When EDA approves the termination 
of an RLF Grant, EDA may assign or transfer assets of the RLF to an RLF 
Third Party for liquidation.
    (c) Terms. The following terms will govern any liquidation:
    (1) EDA shall have sole discretion in choosing the RLF Third Party;
    (2) The RLF Third Party may be an Eligible Applicant or a for-
profit organization not otherwise eligible for Investment Assistance;
    (3) EDA may enter into an agreement with the RLF Third Party to 
liquidate the assets of one (1) or more RLFs or RLF Recipients;
    (4) EDA may allow the RLF Third Party to retain a portion of the 
RLF assets, consistent with the agreement referenced in paragraph 
(c)(3) of this section, as reasonable compensation for services 
rendered in the liquidation; and
    (5) EDA may require additional reasonable terms and conditions.
    (d) Distribution of proceeds. The proceeds resulting from any 
liquidation upon termination shall be distributed in the following 
order of priority:
    (1) First, for any third party liquidation costs;
    (2) Second, for the payment of EDA's Federal Share (as defined in 
Sec.  314.5 of this chapter); and
    (3) Third, if any proceeds remain, to the RLF Recipient.


Sec.  307.21  Termination of Revolving Loan Funds.

    (a) EDA may suspend or terminate an RLF Grant for cause, including 
but not limited to the following reasons:
    (1) Failure to operate the RLF in accordance with the Plan, the RLF 
Grant or this part;
    (2) Failure to obtain prior EDA approval for material changes to 
the Plan, including provisions for administering the RLF;
    (3) Failure to submit timely progress, financial and audit reports 
as required by the RLF Grant and Sec.  307.14; and
    (4) Failure to comply with the conflicts of interest provisions set 
forth in Sec.  302.17.
    (b) EDA may approve a request from an RLF Recipient to terminate an 
RLF Grant. The RLF Recipient must compensate the Federal government for 
the Federal Share of the RLF property, including the current value of 
all outstanding RLF loans. However, with EDA's prior approval, upon a 
showing of compelling circumstances, the RLF Recipient may use for 
other economic development activities a portion of RLF property that 
EDA determines is attributable to RLF Income.
    (c) Upon termination, distribution of proceeds shall occur in 
accordance with Sec.  307.20(d).


Sec.  307.22  Variances.

    EDA may approve variances to the requirements contained in this 
subpart, provided such variances:
    (a) Are consistent with the goals of the Economic Adjustment 
Assistance program and with an RLF Plan;
    (b) Are necessary and reasonable for the effective implementation 
of the RLF;
    (c) Are economically and financially sound; and
    (d) Do not conflict with any applicable legal requirements, 
including Federal, State and local law.

PART 308--PERFORMANCE INCENTIVES

Sec.
308.1 Use of funds in Projects constructed under projected cost.
308.2 Performance awards.
308.3 Planning performance awards.

    Authority: 42 U.S.C. 3151; 42 U.S.C. 3154a; 42 U.S.C. 3154b; 
Department of Commerce Delegation Order 10-4.


Sec.  308.1  Use of funds in Projects constructed under projected cost.

    (a) If the Assistant Secretary determines before closeout of a 
construction Project funded under parts 305 or 307 of this chapter that 
the cost of the Project, based on the designs and specifications that 
were the basis of the Investment Assistance, has decreased because of a 
decrease in costs, EDA may in its discretion approve the use of the 
excess funds (or a portion of the excess funds) by the Recipient to:
    (1) Increase the Investment Rate of the Project to the maximum 
percentage allowable under Sec.  301.4 of this chapter for which the 
Project was eligible at the time of the Investment award; or
    (2) Further improve the Project consistent with its purpose.
    (b) EDA, in its sole discretion, may use any amount of excess funds 
remaining after application of paragraph (a) of this section for other 
eligible Investments.
    (c) In the case of Projects involving funds transferred from other 
Federal Agencies, EDA will consult with the transferring Agency 
regarding the use of any excess funds.


Sec.  308.2  Performance awards.

    (a) A Recipient of Investment Assistance under parts 305 or 307 of 
this chapter may receive a performance award in connection with an 
Investment made on or after the date of enactment of section 215 of 
PWEDA in an amount not to exceed ten (10) percent of the amount of the 
Investment award.
    (b) To receive a performance award, a Recipient must demonstrate 
Project performance in one (1) or more of the areas listed in this 
paragraph, weighted at the discretion of the Assistant Secretary:
    (1) Meet or exceed the Recipient's projection of jobs created;
    (2) Meet or exceed the Recipient's projection of private sector 
capital invested;
    (3) Meet or exceed target dates for Project start and completion 
stated at the time of Investment approval;
    (4) Fulfill the proposal evaluation criteria set forth in Sec.  
301.8 of this chapter; or
    (5) Demonstrate other unique Project performance characteristics as 
determined by the Assistant Secretary.
    (c) A Recipient may receive a performance award no later than three 
(3) years following the Project's closeout.
    (d) A performance award may fund up to one hundred (100) percent of 
the cost of an eligible Project or any other authorized activity under 
PWEDA. For the purpose of meeting the non-Federal share requirement of 
PWEDA or any other statute, the amount of a performance award shall be 
treated as non-Federal funds.
    (e) The applicable FFO will set forth the requirements, 
qualifications, guidelines and procedures for performance awards to be 
made during

[[Page 56697]]

the applicable fiscal year, with all performance awards being subject 
to the availability of funds.


Sec.  308.3  Planning performance awards.

    (a) At the discretion of the Assistant Secretary, a Recipient of 
Investment Assistance awarded on or after the date of enactment of 
section 216 of PWEDA located in an EDA-funded Economic Development 
District may receive a planning performance award in an amount not to 
exceed five (5) percent of the amount of the applicable Investment 
award if EDA determines no later than three (3) years following 
closeout of the Project that:
    (1) The Recipient, through the Project, actively participated in 
the economic development activities of the District;
    (2) The Project demonstrated exceptional fulfillment of one (1) or 
more components of, and is otherwise in accordance with, the applicable 
CEDS, including any job creation or job retention requirements; and
    (3) The Recipient demonstrated exceptional collaboration with 
Federal, State and local economic development entities throughout the 
development of the Project.
    (b) The Recipient shall use the planning performance award to 
increase, up to one hundred (100) percent, the Federal share of the 
cost of a Project under this chapter.
    (c) The applicable FFO may set forth additional requirements, 
qualifications and guidelines for planning performance awards.

PART 309--REDISTRIBUTIONS OF INVESTMENT ASSISTANCE

Sec.
309.1 Redistributions under parts 303, 305 and 306.
309.2 Redistributions under part 307.

    Authority: 42 U.S.C. 3154c; 42 U.S.C. 3211; Department of 
Commerce Delegation Order 10-4.


Sec.  309.1  Redistributions under parts 303, 305 and 306.

    (a) General. Except as provided in paragraph (b) of this section, a 
Recipient of Investment Assistance under parts 303, 305 or 306 of this 
chapter may directly expend such Investment Assistance or, with prior 
EDA approval, may redistribute such Investment Assistance in the form 
of a subgrant to another Eligible Recipient that qualifies for 
Investment Assistance under the same part of this chapter as the 
Recipient, to fund required components of the scope of work approved 
for the Project. All subgrants made pursuant to this section shall be 
subject to the same terms and conditions applicable to the Recipient 
under the original Investment Assistance award and must satisfy the 
requirements of PWEDA and of this chapter.
    (b) Exception. A Recipient may not make a subgrant of Investment 
Assistance received under parts 303 or 305 of this chapter to a for-
profit entity.


Sec.  309.2  Redistributions under part 307.

    (a) A Recipient of Investment Assistance under part 307 of this 
chapter may directly expend such Investment Assistance or, with prior 
EDA approval, may redistribute such Investment Assistance in the form 
of:
    (1) A subgrant to another Eligible Recipient that qualifies for 
Investment Assistance under part 307 of this chapter; or
    (2) Pursuant to part 307, subpart B, a loan or other appropriate 
assistance to non-profit and private for-profit entities.
    (b) All redistributions of Investment Assistance made pursuant to 
this section shall be subject to the same terms and conditions 
applicable to the Recipient under the original Investment Assistance 
award and must satisfy the requirements of PWEDA and of this chapter.

PART 310--SPECIAL IMPACT AREAS

Sec.
310.1 Special Impact Area.
310.2 Pressing need; alleviation of unemployment or underemployment.

    Authority: 42 U.S.C. 3154; Department of Commerce Organization 
Order 10-4.


Sec.  310.1  Special Impact Area.

    Upon the application of an Eligible Recipient, and with respect to 
that Eligible Recipient's Project only, the Assistant Secretary may 
designate the Region which the Project will serve as a Special Impact 
Area if the Eligible Recipient demonstrates that its proposed Project 
will:
    (a) Directly fulfill a pressing need and
    (b) Be useful in alleviating or preventing conditions of excessive 
unemployment or underemployment, or assist in providing useful 
employment opportunities for the unemployed or underemployed residents 
of the Region.


Sec.  310.2  Pressing need; alleviation of unemployment or 
underemployment.

    (a) The Assistant Secretary may find a pressing need to exist if 
the Region which the Project will serve:
    (1) Has a unique or urgent circumstance that would necessitate 
waiver of the CEDS requirements of Sec.  303.7 of this chapter;
    (2) Involves a Project undertaken by an Indian Tribe;
    (3) Is rural and severely distressed;
    (4) Is undergoing a transition in its economic base as a result of 
changing trade patterns (e.g., the Region is certified as eligible by 
the North American Development Bank Program or the Community Adjustment 
and Investment Program);
    (5) Exhibits a substantial reliance on a natural resource for its 
economic well-being;
    (6) Has been designated as a Federally-Declared Disaster area; or
    (7) Has a Special Need.
    (b) For purposes of this part, excessive unemployment exists if the 
twenty-four (24) month unemployment rate is at least 225% of the 
national average or the per capita income is not more than 50% of the 
national average. A Region demonstrates excessive underemployment if 
the employment of a substantial percentage of workers in the Region is 
less than full-time or at less skilled tasks than their training or 
abilities would otherwise permit. Eligible Recipients seeking a Special 
Impact Area designation under this criterion must present appropriate 
and compelling economic and demographic data.
    (c) Eligible Recipients may demonstrate the provision of useful 
employment opportunities by quantifying and evidencing the Project's 
prospective:
    (1) Creation of jobs;
    (2) Commitment of financial investment by private entities; or
    (3) Application of innovative technology that will lead to the 
creation of jobs or the commitment of financial investment by private 
entities.

PART 311 [RESERVED]

PART 312 [RESERVED]

PART 313 [RESERVED]

PART 314--PROPERTY

Subpart A--General

Sec.
314.1 Definitions.
314.2 Federal Interest.
314.3 Authorized use of Property.
314.4 Unauthorized Use of Property.
314.5 Federal Share.
314.6 Encumbrances.
Subpart B--Real Property
314.7 Title.
314.8 Recorded statement.
Subpart C--Personal Property
314.9 Recorded statement--title.
Subpart D--Release of EDA's Property Interest
314.10 Procedures for release of EDA's Property interest.


[[Page 56698]]


    Authority: 42 U.S.C. 3211; Department of Commerce Organization 
Order 10-4.

Subpart A--General


Sec.  314.1  Definitions.

    In addition to the defined terms set forth in Sec.  300.3 of this 
chapter, the following terms shall have the following meanings:
    Adequate Consideration means the fair market value at the time of 
sale or lease of any Property, as adjusted, in EDA's sole discretion, 
by any services, property exchanges, contractual commitments, acts of 
forbearance or other considerations that are in furtherance of the 
authorized purposes of the Investment Assistance, which are received by 
the Recipient or Owner in exchange for such Property.
    Disposition or Dispose means the sale, lease, abandonment or other 
disposition of any Property and also includes the Unauthorized Use of 
such Property.
    Estimated Useful Life, as used in this part, means the period of 
years that constitutes the expected useful lifespan of a Project, as 
determined by EDA, during which EDA anticipates obtaining the economic 
development benefits of its Investment.
    Federal Interest has the definition ascribed to it in Sec.  
314.2(a).
    Federal Share has the definition ascribed to it in Sec.  314.5.
    Owner means a fee owner, transferee, lessee or optionee of any 
Property. The term Owner also includes the holder of other interests in 
a Property where the interests are such that the holder effectively 
controls the use of such Property.
    Personal Property means all tangible and intangible property other 
than Real Property.
    Property means Real Property, Personal Property and mixed property.
    Real Property means any land, whether raw or improved, and includes 
structures, fixtures, appurtenances and other permanent improvements, 
excluding moveable machinery and equipment. Real Property includes land 
that is improved by the construction of Project infrastructure such as, 
but not limited to, roads, sewers and water lines that are not situated 
on or under the land, where the infrastructure contributes to the value 
of such land as a specific purpose of the Project.
    Successor Recipient means an EDA-approved transferee of Property 
pursuant to Sec.  314.3(d). A Successor Recipient must be an Eligible 
Recipient of Investment Assistance.
    Unauthorized Use means any use of Property acquired or improved in 
whole or in part for purposes not authorized by EDA Investment 
Assistance, PWEDA or this chapter, as set forth in Sec.  314.4.


Sec.  314.2  Federal Interest.

    (a) Property that is acquired or improved, in whole or in part, 
with Investment Assistance shall be held in trust by the Recipient for 
the benefit of the Project for the Estimated Useful Life of the 
Project, during which period EDA retains an undivided equitable 
reversionary interest in the Property (the ``Federal Interest''). The 
Federal Interest secures compliance with matters such as the purpose, 
scope and use of a Project and is often reflected by a recorded lien, 
statement or other recordable instrument setting forth EDA's Property 
interest in a Project (e.g., a mortgage, covenant, or other statement 
of EDA's Real Property interest in the case of a Project involving the 
acquisition, construction or improvement of a building. See Sec.  
314.8.)
    (b) When the Federal government is fully compensated for the 
Federal Share of Property acquired or improved, in whole or in part, 
with Investment Assistance, the Federal Interest is extinguished and 
the Federal government has no further interest in the Property.


Sec.  314.3  Authorized Use of Property.

    (a) The Recipient or Owner must use any Property acquired or 
improved in whole or in part with Investment Assistance only for the 
authorized purpose of the Project and such Property must not be 
Disposed of or encumbered without EDA's prior written authorization.
    (b) Where EDA and the Recipient determine that Property acquired or 
improved in whole or in part with Investment Assistance is no longer 
needed for the original purpose of the Investment Assistance, EDA, in 
its sole discretion, may approve the use of such Property in other 
Federal grant programs or in programs that have purposes consistent 
with those authorized by PWEDA and by this chapter.
    (c) Where EDA determines that the authorized purpose of the 
Investment Assistance is to develop Real Property to be leased or sold, 
such sale or lease is permitted provided it is for Adequate 
Consideration and the sale is consistent with the authorized purpose of 
the Investment Assistance and with all applicable Investment Assistance 
requirements including but not limited to nondiscrimination and 
environmental compliance.
    (d) EDA, in its sole discretion, may approve the transfer of any 
Property from a Recipient to a Successor Recipient (or from one 
Successor Recipient to another Successor Recipient). The Recipient will 
remain responsible for complying with the rules of this part and the 
terms and conditions of the Investment Assistance for the period in 
which it is the Recipient. Thereafter, the Successor Recipient must 
comply with the rules of this part and with the same terms and 
conditions as were applicable to the Recipient (unless such terms and 
conditions are otherwise amended by EDA). The same rules apply to EDA-
approved transfers of Property between Successor Recipients.
    (e) When acquiring replacement Personal Property of equal or 
greater value than Personal Property originally acquired with 
Investment Assistance, the Recipient may, with EDA's approval, trade in 
such Personal Property originally acquired or sell the original 
Personal Property and use the proceeds for the acquisition of the 
replacement Personal Property; provided that the replacement Personal 
Property is for use in the Project. The replacement Personal Property 
is subject to the same requirements as the original Personal Property. 
In extraordinary and compelling circumstances, the Assistant Secretary 
may approve the replacement of Real Property used in a Project.
    (f) With EDA's prior written approval, a Recipient may undertake an 
incidental use of Property that does not interfere with the scope of 
the Project or the economic purpose for which the Investment was made; 
provided that the Recipient is in compliance with applicable law and 
the terms and conditions of the Investment Assistance, and the 
incidental use of the Property will not violate the terms and 
conditions of the Investment Assistance or otherwise adversely affect 
the economic useful life of the Property. Eligible Applicants and 
Recipients should contact the appropriate regional office (whose 
contact information is available via the Internet at http://www.eda.gov) for guidelines on obtaining approval for incidental use of 
Property under this section.


Sec.  314.4  Unauthorized Use of Property.

    (a) Except as provided in Sec. Sec.  314.3 (regarding the 
authorized use of Property) or 314.10 (regarding the release of EDA's 
interest in certain Property), or as otherwise authorized by EDA, the 
Federal government must be compensated by the Recipient for the Federal 
Share whenever, during the Estimated Useful Life of the Project, any 
Property acquired or improved in whole or in part with Investment 
Assistance is Disposed of, encumbered, or no longer

[[Page 56699]]

used for the purpose of the Project; provided that for equipment and 
supplies, the requirements at 15 CFR parts 14 or 24, as applicable, 
including any supplements or amendments thereto, shall apply.
    (b) Additionally, prior to the release of EDA's interest, Real 
Property or tangible Personal Property acquired or improved with EDA 
Investment Assistance may not be used:
    (1) In violation of the nondiscrimination requirements of Sec.  
302.20 of this chapter or in violation of the terms and conditions of 
the Investment Assistance; or
    (2) For any purpose prohibited by applicable law.
    (c) Where the Disposition, encumbrance or use of any Property 
violates paragraphs (a) or (b) of this section, EDA may assert its 
interest in the Property to recover the Federal Share for the Federal 
government and may take such actions as authorized by PWEDA and this 
chapter, including but not limited to the actions provided in 
Sec. Sec.  302.3 and 307.21 of this chapter. EDA may pursue its rights 
under paragraph (a) of this section and this paragraph (c) to recover 
the Federal Share, plus costs and interest. When the Federal government 
is fully compensated for the Federal Share, the Federal Interest is 
extinguished as provided in Sec.  314.2(b), and EDA will have no 
further interest in the ownership, use or Disposition of the Property.


Sec.  314.5  Federal Share.

    For purposes of this part, ``Federal Share'' means that portion of 
the current fair market value of any Property (after deducting actual 
and reasonable selling and repair expenses, if any, incurred to put the 
Property into marketable condition) attributable to EDA's participation 
in the Project. The Federal Share excludes that portion of the current 
fair market value of the Property attributable to acquisition or 
improvements before or after EDA's participation in the Project, which 
are not included in the total Project costs. For example, if the total 
Project costs are $100, consisting of $50 of Investment Assistance and 
$50 of Matching Share, the Federal Share is fifty (50) percent. If the 
Property is disposed of when its current fair market is $250, the 
Federal Share is $125 (i.e., fifty (50) percent of $250). If $10 is 
spent to put the Property into salable condition, the Federal Share is 
$120 (i.e., fifty (50) percent of ($250-$10)).


Sec.  314.6  Encumbrances.

    (a) General. Except as provided in paragraph (b) of this section or 
as otherwise authorized by EDA, Recipient-owned Property acquired or 
improved in whole or in part with Investment Assistance must not be 
used to secure a mortgage or deed of trust or in any way collateralized 
or otherwise encumbered, except to secure a grant or loan made by a 
Federal Agency or State agency or other public body participating in 
the same Project. An encumbrance includes but is not limited to 
easements, rights-of-way or other restrictions on the use of any 
Property.
    (b) Exceptions. Subject to EDA's approval, which will not be 
unreasonably withheld or unduly delayed, paragraph (a) of this section 
does not apply to:
    (1) Recipient-owned Property that is subject to an encumbrance at 
the time EDA approves the Project, where EDA determines that the 
requirements of Sec.  314.7(b) are met;
    (2) Encumbrances arising solely from the requirements of a pre-
existing water or sewer facility or other utility encumbrances, which 
by their terms extend to additional Property connected to such 
facilities; and
    (3) Encumbrances in cases where all of the following are met:
    (i) EDA, in its sole discretion, determines that there is good 
cause for a waiver of paragraph (a) of this section;
    (ii) All proceeds secured by the encumbrance on the Property shall 
be available only to the Recipient and shall be used only for the 
Project for which the Investment Assistance applies or for related 
activities of which the Project is an essential part;
    (iii) A grantor/lender will not provide funds without the security 
of a lien on the Property; and
    (iv) There is a reasonable expectation, as determined by EDA, that 
the Recipient will not default on its obligations.
    (c) Encumbering Recipient-owned Property, other than as permitted 
in this section, is an Unauthorized Use of the Property under Sec.  
314.4.

Subpart B--Real Property


Sec.  314.7  Title.

    (a) General. The Recipient must hold title to the Real Property 
required for a Project at the time the Investment Assistance is awarded 
or as provided by paragraph (c) of this section and must maintain title 
at all times during the Estimated Useful Life of the Project, except in 
those limited circumstances as provided in paragraph (c) of this 
section. The Recipient must also furnish evidence, satisfactory in form 
and substance to EDA, that title to Real Property required for a 
Project (other than property of the United States) is vested in the 
Recipient and that any easements, rights-of-way, State or local 
government permits, long-term leases or other items required for the 
Project have been or will be obtained by the Recipient within an 
acceptable time, as determined by EDA.
    (b)(1) The Recipient must disclose to EDA all encumbrances, 
including but not limited to the following:
    (i) Liens;
    (ii) Mortgages;
    (iii) Reservations;
    (iv) Reversionary interests; and
    (v) Other restrictions on title or on the Recipient's interest in 
the Property.
    (2) No encumbrance will be acceptable if, as determined by EDA, the 
encumbrance interferes with the construction, use, operation or 
maintenance of the Project during its Estimated Useful Life.
    (c) Exceptions. The following are exceptions to the requirements of 
paragraph (a) of this section that the Recipient hold title to the Real 
Property required for a Project.
    (1) Where the acquisition of Real Property required for a Project 
is contemplated as part of an Investment Assistance award, EDA may 
determine that an agreement for the Recipient to purchase the Real 
Property will be acceptable for purposes of paragraph (a) of this 
section if:
    (i) The Recipient provides EDA with reasonable assurances that it 
will obtain fee title to the Real Property prior to or concurrent with 
the initial disbursement of the Investment Assistance; and
    (ii) EDA, in its sole discretion, determines that the terms and 
conditions of the purchase agreement adequately safeguard the Federal 
government's interest in the Real Property.
    (2) EDA may determine that a long-term leasehold interest for a 
period not less than the Estimated Useful Life of the Real Property 
required for a Project will be acceptable for purposes of paragraph (a) 
of this section if:
    (i) Fee title to the Real Property is not otherwise obtainable; and
    (ii) EDA, in its sole discretion, determines that the terms and 
conditions of the lease adequately safeguard the Federal government's 
interest in the Real Property.
    (3) When a Project includes construction within a railroad's right-
of-way or over a railroad crossing, EDA may find it acceptable for the 
work to be completed by the railroad and for the railroad to continue 
to own, operate and maintain that portion of the Project, if required 
by the railroad; and provided

[[Page 56700]]

that, the construction is a minor but essential component of the 
Project.
    (4) When a Project includes construction on a State-owned or local 
government-owned highway (i.e., where the Recipient is not the State or 
local government owner), EDA may find it acceptable for the State or 
local government to own, operate and maintain that portion of the 
Project, if required by the State or local government; provided that, 
construction is a minor but essential component of the Project, the 
construction is completed in accordance with EDA requirements, and the 
State or local government provides assurances to EDA that the:
    (i) State or local government will operate and maintain the 
improvements for the Estimated Useful Life of the Project;
    (ii) State or local government will not sell the improvements for 
the Estimated Useful Life of the Project; and
    (iii) Use of the Property will be consistent with the authorized 
purposes of the Project.
    (5)(i) When an authorized purpose of the Project is to construct 
facilities to serve Real Property owned by the Recipient, including but 
not limited to industrial or commercial parks, for sale or lease to 
private parties, such sale or lease is permitted so long as:
    (A) In cases where an authorized purpose of the Project is to sell 
Real Property, the Recipient provides evidence sufficient to EDA that 
it holds title to the Real Property required for such Project prior to 
the disbursement of any portion of the Investment Assistance and will 
retain title until the sale of the Property;
    (B) In cases where an authorized purpose of the Project is to lease 
Real Property, the Recipient provides evidence sufficient to EDA that 
it holds title to the Real Property required for such Project prior to 
the EDA disbursement of any portion of the Investment Assistance and 
will retain title for the entire Estimated Useful Life of the Project;
    (C) The Recipient completes the Project according to the terms of 
the Investment Assistance;
    (D) The sale or lease of any portion of the Project during its 
Estimated Useful Life must be for Adequate Consideration and the terms 
and conditions of the Investment Assistance and the purpose(s) of the 
Project must continue to be fulfilled after such sale or lease; 
provided, however, that EDA may waive this provision for any sale or 
lease occurring after the ten (10) year anniversary of the award date 
of the Investment Assistance;
    (E) The Recipient agrees that the termination, cessation, 
abandonment or other failure on behalf of the Recipient, purchaser or 
lessee to complete the Project by the five (5) year anniversary of the 
award date of the Investment Assistance constitutes a failure on behalf 
of the Recipient to use the Real Property for the economic purposes 
justifying the Project; and
    (F) The Recipient agrees that a violation of this paragraph by the 
Recipient, purchaser or lessee constitutes an Unauthorized Use of the 
Real Property and the Recipient must further agree to compensate EDA 
for the Federal government's Federal Share of the Project in the case 
of such Unauthorized Use.
    (ii) EDA may also condition the sale or lease on the satisfaction 
by the Recipient, purchaser or lessee (as the case may be) of any 
additional requirements that EDA may impose, including but not limited 
to EDA's pre-approval of the sale or lease.
    (6)(i) When an authorized purpose of the Project is to construct 
facilities to serve privately-owned Real Property, including but not 
limited to industrial or commercial parks, the ownership, sale or lease 
of such Real Property is permitted so long as:
    (A) The Owner provides evidence sufficient to EDA that it holds 
title to the Real Property improved or benefited by the EDA Investment 
Assistance prior to the disbursement of any portion of the Investment 
Assistance and will retain title to the Real Property for the entire 
Estimated Useful Life of the Property or until the sale of such Real 
Property;
    (B) The Recipient and the Owner agree to use Real Property improved 
or benefited by the EDA Investment Assistance only for the authorized 
purposes of the Project and in manner consistent with the terms and 
conditions of the EDA Investment Assistance for the Estimated Useful 
Life of the Project;
    (C) The Recipient must provide adequate assurances that the Owner 
will complete the Project according to the terms of the Investment 
Assistance;
    (D) The sale or lease of any portion of the Project during its 
Estimated Useful Life must be for Adequate Consideration and the terms 
and conditions of the Investment Assistance and the purpose(s) of the 
Project must continue to be fulfilled after such sale or lease; 
provided, however, that EDA may waive this provision for any sale or 
lease occurring after the ten (10) year anniversary of the award date 
of the Investment Assistance;
    (E) The Recipient agrees that the termination, cessation, 
abandonment or other failure on behalf of the Recipient, Owner, 
purchaser or lessee to complete the Project by the five (5) year 
anniversary of the award date of the Investment Assistance constitutes 
a failure on behalf of the Recipient to use the Real Property for the 
economic purposes justifying the Project; and
    (F) The Recipient further agrees that a violation of this paragraph 
by the Owner, purchaser or lessee constitutes an Unauthorized Use of 
the Real Property and the Recipient must further agree to compensate 
EDA for the Federal government's Federal Share of the Project in the 
case of such Unauthorized Use.
    (ii) EDA may also condition its Investment Assistance on the 
satisfaction by the Recipient, Owner or by the purchaser or lessee (as 
the case may be) of any additional requirements that EDA may impose, 
including but not limited to EDA's pre-approval of a sale or lease.


Sec.  314.8  Recorded statement.

    (a) For all Projects involving the acquisition, construction or 
improvement of a building, as determined by EDA, the Recipient shall 
execute a lien, covenant or other statement of EDA's interest in the 
Property acquired or improved in whole or in part with the EDA 
Investment Assistance. The statement shall specify the Estimated Useful 
Life of the Project and shall include, but not be limited to, the 
Disposition, encumbrance and Federal Share requirements. The statement 
shall be satisfactory in form and substance to EDA.
    (b) The statement of EDA's interest must be perfected and placed of 
record in the Real Property records of the jurisdiction in which the 
Real Property is located, all in accordance with applicable law.
    (c) Facilities in which the EDA Investment is only a small part of 
a large project, as determined by EDA, may be exempted from the 
requirements of this section.

Subpart C--Personal Property


Sec.  314.9  Recorded statement--title.

    For all Projects which EDA determines involve the acquisition or 
improvement of significant items of Personal Property, including but 
not limited to ships, machinery, equipment, removable fixtures or 
structural components of buildings, the Recipient shall execute a 
security interest or other statement of EDA's interest in the Personal 
Property, acceptable in form

[[Page 56701]]

and substance to EDA, which statement must be perfected and placed of 
record in accordance with applicable law, with continuances re-filed as 
appropriate. Whether or not a statement is required by EDA to be 
recorded, the Recipient must hold title to the Personal Property 
acquired or improved as part of the Project, except as otherwise 
provided in this part.

Subpart D--Release of EDA's Property Interest


Sec.  314.10  Procedures for release of EDA's Property interest.

    (a) General. Upon the request of a Recipient and before the 
expiration of the Estimated Useful Life of a Project, EDA may release 
any Real Property or tangible Personal Property interest held by EDA, 
in connection with Investment Assistance after the date that is twenty 
(20) years after the date on which the Investment Assistance was 
awarded.
    (b) Exception. EDA releases all of its Real Property and tangible 
Personal Property interests in Projects awarded under the Public Works 
Employment Act of 1976 (Pub. L. 94-369), as amended by the Public Works 
Employment Act of 1977 (Pub. L. 95-28).
    (c)(1) Unauthorized Use. Notwithstanding the release of EDA's 
interest pursuant to paragraphs (a) or (b) of this section, Real 
Property or tangible Personal Property acquired or improved with 
Investment Assistance may not be used:
    (i) In violation of the nondiscrimination requirements set forth in 
Sec.  302.20 of this chapter; or
    (ii) For inherently religious activities prohibited by applicable 
Federal law.
    (2) Violation of this paragraph (c) constitutes an Unauthorized Use 
of the Real Property or of the tangible Personal Property.
    (d) Release.
    (1) Except as provided in paragraph (b) of this section, the 
release of EDA's interest pursuant to this section is not automatic; it 
requires EDA's approval, which will not be withheld except for good 
cause, as determined in EDA's sole discretion. In addition to the 
restrictions set forth in paragraph (c) of this section, the release 
may be conditioned upon some activity of the Recipient intended to be 
pursued as a consequence of the release.
    (2) When requesting a release of EDA's interest pursuant to 
paragraph (a) of this section, the Recipient will be required to 
disclose to EDA the intended future use of the Real Property or the 
tangible Personal Property for which the release is requested.
    (i) A Recipient not intending to use the Real Property or tangible 
Personal Property for inherently religious activities following EDA's 
release will be required to execute a covenant of use. A covenant of 
use with respect to Real Property shall be recorded in the jurisdiction 
where the Real Property is located in accordance with Sec.  314.8. A 
covenant of use with respect to items of tangible Personal Property 
shall be perfected and recorded in accordance with applicable law, with 
continuances re-filed as appropriate. See Sec.  314.9. A covenant of 
use shall (at a minimum) prohibit the use of the Real Property or the 
tangible Personal Property:
    (A) For inherently religious activities in violation of applicable 
Federal law; and
    (B) For any purpose that would violate the nondiscrimination 
requirements set forth in Sec.  302.20 of this chapter.
    (ii) EDA may require a Recipient (or its successors in interest) 
who intends or foresees the use of Real Property or tangible Personal 
Property for inherently religious activities following the release of 
EDA's interest to compensate EDA for the Federal Share of such 
Property. EDA recommends that a Recipient who intends or foresees the 
use of Real Property or tangible Personal Property (including by 
successors of the Recipient) for inherently religious activities to 
contact EDA well in advance of requesting a release pursuant to this 
section.

PART 315--TRADE ADJUSTMENT ASSISTANCE FOR FIRMS

Subpart A--General Provisions
Sec.
315.1 Purpose and scope.
315.2 Definitions.
315.3 Confidential Business Information.
315.4 Eligible petitioners.
315.5 TAAC scope, selection, evaluation and awards.
315.6 Firm eligibility for Adjustment Assistance.
Subpart B--Certification of Firms
315.7 Certification requirements.
315.8 Processing petitions for certification.
315.9 Hearings.
315.10 Loss of certification benefits.
315.11 Appeals, final determinations and termination of 
certification.
Subpart C--Protective Provisions
315.12 Recordkeeping.
315.13 Audit and examination.
315.14 Certifications.
315.15 Conflicts of interest.
Subpart D--Adjustment Proposals
315.16 Adjustment Proposal Requirements.
Subpart E--Assistance to Industries
315.17 Assistance to Firms in import-impacted industries.

    Authority: 42 U.S.C. 3211; 19 U.S.C. 2341 et seq.; Department of 
Commerce Organization Order 10-4.

Subpart A--General Provisions


Sec.  315.1  Purpose and scope.

    The regulations in this part set forth the responsibilities of the 
Secretary of Commerce under chapter 3 of title II of the Trade Act 
concerning Trade Adjustment Assistance for Firms. The statutory 
authority and responsibilities of the Secretary of Commerce relating to 
Adjustment Assistance are delegated to EDA. EDA certifies Firms as 
eligible to apply for Adjustment Assistance, provides technical 
Adjustment Assistance to Firms and other recipients, and provides 
assistance to organizations representing trade injured industries.


Sec.  315.2  Definitions.

    In addition to the defined terms set forth in Sec.  300.3 of this 
chapter, the following terms used in this part shall have the following 
meanings:
    Adjustment Assistance means technical assistance provided to Firms 
or industries under chapter 3 of title II of the Trade Act.
    Adjustment Proposal means a Certified Firm's plan for improving its 
economic situation.
    Certified Firm means a Firm which has been determined by EDA to be 
eligible to apply for Adjustment Assistance.
    Confidential Business Information means any information submitted 
to EDA or a TAAC by a Firm that concerns or relates to trade secrets 
for commercial or financial purposes, which is exempt from public 
disclosure under 5 U.S.C. 552(b)(4), 5 U.S.C. 552b(c)(4) and 15 CFR 
part 4.
    Contributed Importantly, with respect to an Increase in Imports, 
refers to a cause which is important but not necessarily more important 
than any other cause. Imports will not be considered to have 
Contributed Importantly if other factors were so dominant, acting 
singly or in combination, that the worker separation or threat thereof 
or decline in sales or production would have been essentially the same, 
irrespective of the influence of imports.
    Decreased Absolutely means a Firm's sales or production has 
declined by a minimum of five (5) percent relative to its sales or 
production during the applicable prior time period, and:
    (1) Irrespective of industry or market fluctuations; and

[[Page 56702]]

    (2) Relative only to the previous performance of the Firm.
    Directly Competitive means:
    (1) Articles which are substantially equivalent for commercial 
purposes (i.e., are adapted to the same function or use and are 
essentially interchangeable); and
    (2) Oil or natural gas (exploration, drilling or otherwise 
produced).
    Firm means an individual proprietorship, partnership, joint 
venture, association, corporation (including a development 
corporation), business trust, cooperative, trustee in bankruptcy or 
receiver under court decree and including fishing, agricultural 
entities and those which explore, drill or otherwise produce oil or 
natural gas. For purposes of receiving benefits under this part, when a 
Firm owns or controls other Firms, the Firm and such other Firms, may 
be considered a single Firm when they produce like or Directly 
Competitive articles or are exerting essential economic control over 
one or more production facilities. Such other Firms include:
    (1) Predecessor--see the following definition for Successor;
    (2) Successor--a newly established Firm (that has been in business 
less than two years) which has purchased substantially all of the 
assets of a previously operating company (or in some cases a whole 
distinct division) (such prior company, unit or division, a 
``Predecessor'') and is able to demonstrate that it continued the 
operations of the Predecessor which has operated as an autonomous unit, 
provided that there were no significant transactions between the 
Predecessor unit and any related parent, subsidiary, or affiliate that 
would have affected its past performance, and that separate records are 
available for the Predecessor's operations for at least two years 
before the petition is submitted. The Successor Firm must have 
continued virtually all of the Predecessor Firm's operations by 
producing the same type of products, in the same plant, utilizing most 
of the same machinery and equipment and most of its former workers, and 
the Predecessor Firm must no longer be in existence;
    (3) Affiliate--a company (either foreign or domestic) controlled or 
substantially beneficially owned by substantially the same person or 
persons that own or control the Firm filing the petition; or
    (4) Subsidiary--a company (either foreign or domestic) that is 
wholly owned or effectively controlled by another company.
    Increase in Imports means an increase of imports of Directly 
Competitive or Like Articles with articles produced by such Firm that 
Contributed Importantly to the applicable Total or Partial Separation 
or threat thereof, and to the applicable decline in sales or 
production.
    Like Articles means any articles which are substantially identical 
in their intrinsic characteristics.
    Partial Separation means, with respect to any employment in a Firm, 
either:
    (1) A reduction in an employee's work hours to eighty (80) percent 
or less of the employee's average weekly hours during the year of such 
reductions as compared to the preceding year; or
    (2) A reduction in the employee's weekly wage to eighty (80) 
percent or less of his/her average weekly wage during the year of such 
reduction as compared to the preceding year.
    Person means an individual, organization or group.
    Record means any of the following:
    (1) A petition for certification of eligibility to qualify for 
Adjustment Assistance;
    (2) Any supporting information submitted by a petitioner;
    (3) The report of an EDA investigation with respect to petition; 
and
    (4) Any information developed during an investigation or in 
connection with any public hearing held on a petition.
    Significant Number or Proportion of Workers means five (5) percent 
of a Firm's work force or fifty (50) workers, whichever is less. An 
individual farmer or fisherman is considered a Significant Number or 
Proportion of Workers.
    Substantial Interest means a direct material economic interest in 
the certification or non-certification of the petitioner.
    TAAC means a Trade Adjustment Assistance Center, as more fully 
described in Sec.  315.5.
    Threat of Total or Partial Separation means, with respect to any 
group of workers, one or more events or circumstances clearly 
demonstrating that a Total or Partial Separation is imminent.
    Total Separation means, with respect to any employment in a Firm, 
the laying off or termination of employment of an employee for lack of 
work.


Sec.  315.3  Confidential Business Information.

    EDA will follow the procedures set forth in 15 CFR 4.9 for the 
submission of Confidential Business Information. Submitters should 
clearly mark and designate as confidential any Confidential Business 
Information.


Sec.  315.4  Eligible petitioners.

    Eligible petitioners for assistance under this part shall be:
    (a) Trade Adjustment Assistance Centers (``TAACs''). A TAAC can be 
a(n):
    (1) University affiliate;
    (2) State or local government affiliate; or
    (3) Non-profit organization.
    (b) Firms; or
    (c) Organizations assisting or representing industries in which a 
substantial number of Firms or workers have been certified as eligible 
to apply for Adjustment Assistance under sections 223 or 251 of the 
Trade Act, including:
    (1) Existing agencies;
    (2) Private individuals;
    (3) Firms;
    (4) Universities;
    (5) Institutions;
    (6) Associations;
    (7) Unions; or
    (8) Other non-profit industry organizations.


Sec.  315.5  TAAC scope, selection, evaluation and awards.

    (a) TAAC purpose and scope.
    (1) TAACs are available to assist Firms in obtaining Adjustment 
Assistance in all fifty (50) U.S. States, the District of Columbia and 
the Commonwealth of Puerto Rico. TAACs provide Adjustment Assistance in 
accordance with this part either through their own staffs or by 
arrangements with outside consultants. Information concerning TAACs 
serving particular areas may be obtained from the TAAC Web site at 
http://www.taacenters.org or from EDA. See the applicable FFO for the 
appropriate points of contact and addresses.
    (2) Prior to submitting a petition for Adjustment Assistance to 
EDA, a Firm should determine the extent to which a TAAC can provide the 
required Adjustment Assistance. EDA will provide Adjustment Assistance 
through TAACs whenever EDA determines that such assistance can be 
provided most effectively in this manner. Requests for Adjustment 
Assistance will normally be made through TAACs.
    (3) TAACs generally provide Adjustment Assistance to a Firm by 
providing the following:
    (i) Assistance to a Firm in preparing its petition for 
certification;
    (ii) Assistance to a Certified Firm in diagnosing its strengths and 
weaknesses and developing its Adjustment Proposal; and
    (iii) Assistance to a Certified Firm in the implementation of its 
Adjustment Proposal.

[[Page 56703]]

    (b) TAAC selection.
    (1) EDA invites currently funded TAACs to submit either new or 
amended applications; provided they have performed in a satisfactory 
manner and complied with previous and/or current conditions in their 
Cooperative Agreements with EDA and contingent upon availability of 
funds. Such TAACs shall submit an application on a form approved by 
OMB, as well as a proposed budget, narrative scope of work, and such 
other information as requested by EDA. Acceptance of an application or 
amended application for a Cooperative Agreement does not assure funding 
by EDA.
    (2) EDA may invite new TAAC proposals through an FFO. If such a 
proposal is acceptable, EDA will invite an application on a form 
approved by OMB. An application will require a narrative scope of work, 
proposed budget and such other information as requested by EDA. 
Acceptance of an application does not assure funding by EDA.
    (c) TAAC evaluation.
    (1) EDA generally evaluates currently funded TAACs based on:
    (i) Performance under Cooperative Agreements with EDA and 
compliance with the terms and conditions of such Cooperative 
Agreements;
    (ii) Proposed scope of work, budget and application or amended 
application; and
    (iii) Availability of funds.
    (2) EDA generally evaluates new TAACs based on:
    (i) Competence in administering business assistance programs;
    (ii) Background and experience of staff;
    (iii) Proposed scope of work, budget and application; and
    (iv) Availability of funding.
    (d) TAAC award requirements.
    (1) EDA generally funds TAACs for twelve (12) months.
    (2) There are no Matching Share requirements for Adjustment 
Assistance provided by the TAACs to Firms for certification or for 
administrative expenses of the TAACs.


Sec.  315.6  Firm eligibility for Adjustment Assistance.

    (a) Firms participate in the Trade Adjustment Assistance for Firms 
program in accordance with the following:
    (1) Firms apply for certification through a TAAC by completing a 
petition for certification. The TAAC will assist Firms in completing 
such petitions (at no cost to the Firms);
    (2) Firms certified in accordance with the procedures described in 
Sec. Sec.  315.7 and 315.8 must prepare an Adjustment Proposal for 
Adjustment Assistance from the TAAC, and submit it to EDA for approval; 
and
    (3) EDA determines whether the Adjustment Assistance requested in 
the Adjustment Proposal is eligible based upon the evaluation criteria 
set forth in subpart D of this part. A Certified Firm may submit a 
request to the TAAC for Adjustment Assistance to implement an approved 
Adjustment Proposal.
    (b) For certification, EDA evaluates Firms' petitions strictly on 
the basis of fulfillment of the requirements set forth in Sec.  315.7.
    (c) (1) Firms generally receive Adjustment Assistance over a two-
year (2) period.
    (2) Matching Share requirements are as follows:
    (i) Each Firm must pay at least twenty-five (25) percent of the 
cost of the preparation of its Adjustment Proposal. Each Firm 
requesting $30,000 or less in total Adjustment Assistance in its 
approved Adjustment Proposal must pay at least twenty-five (25) percent 
of the cost of that Adjustment Assistance. Each Firm requesting more 
than $30,000 in total Adjustment Assistance in its approved Adjustment 
Proposal must pay at least fifty (50) percent of the cost of that 
Adjustment Assistance.
    (ii) Organizations representing trade-injured industries must pay 
at least fifty (50) percent of the total cash cost of the Adjustment 
Assistance, in addition to appropriate in-kind contributions.

Subpart B--Certification of Firms


Sec.  315.7  Certification requirements.

    (a) EDA may certify a Firm as eligible to apply for Adjustment 
Assistance under section 251(c) of the Trade Act if it determines that 
the petition for certification meets one of the requirements set forth 
in paragraph (b) of this section. In order to be certified, a Firm must 
meet the criteria listed under any one of the three (3) circumstances 
in paragraph (b) of this section.
    (b)(1) Twelve-month (12) decline. Based upon a comparison of the 
most recent twelve-month (12) period for which data are available and 
the immediately preceding twelve-month (12) period:
    (i) A Significant Number or Proportion of Workers in the Firm has 
undergone Total or Partial Separation or a Threat of Total or Partial 
Separation;
    (ii) Either sales or production of the Firm has Decreased 
Absolutely; or sales or production, or both, of any article that 
accounted for not less than twenty-five (25) percent of the total 
production or sales of the Firm during the twelve-month (12) period 
preceding the most recent twelve-month (12) period for which data are 
available have Decreased Absolutely; and
    (iii) An Increase in Imports has occurred; or
    (2) Interim sales or production decline. Based upon an interim 
sales or production decline:
    (i) Sales or production has Decreased Absolutely for, at minimum, 
the most recent six-month (6) period during the most recent twelve-
month (12) period for which data are available as compared to the same 
six-month (6) period during the immediately preceding twelve-month (12) 
period;
    (ii) During the same base and comparative period of time as sales 
or production has Decreased Absolutely, a Significant Number or 
Proportion of Workers in such Firm has undergone Total or Partial 
Separation or a Threat of Total or Partial Separation; and
    (iii) During the same base and comparative period of time as sales 
or production has Decreased Absolutely, an Increase in Imports has 
occurred; or
    (3) Interim employment decline. Based upon an interim employment 
decline:
    (i) A Significant Number or Proportion of Workers in such Firm has 
undergone Total or Partial Separation or a Threat of Total or Partial 
Separation during, at a minimum, the most recent six-month (6) period 
during the most recent twelve-month (12) period for which data are 
available as compared to the same six-month (6) period during the 
immediately preceding twelve-month (12) period; and
    (ii) Either sales or production of the Firm has Decreased 
Absolutely during the twelve-month (12) period preceding the most 
recent twelve-month (12) period for which data are available; and
    (iii) An Increase in Imports has occurred.


Sec.  315.8  Processing petitions for certification.

    (a) Firms shall consult with a TAAC for guidance and assistance in 
the preparation of their petitions for certification.
    (b) A Firm seeking certification shall complete a Petition by a 
Firm for Certification of Eligibility to Apply for Trade Adjustment 
Assistance (Form ED-840P or any successor form) with the following 
information about such Firm:
    (1) Identification and description of the Firm, including legal 
form of organization, economic history, major ownership interests, 
officers, directors, management, parent company,

[[Page 56704]]

Subsidiaries or Affiliates, and production and sales facilities;
    (2) Description of goods and services produced and sold;
    (3) Description of imported Directly Competitive or Like Articles 
with those produced;
    (4) Data on its sales, production and employment for the two most 
recent years;
    (5) One (1) copy of a complete auditor's certified financial report 
for the entire period covering the petition, or if not available, one 
(1) copy of the complete profit and loss statements, balance sheets and 
supporting statements prepared by the Firm's accountants for the entire 
period covered by the petition; publicly-owned corporations should 
submit copies of the most recent Form 10-K annual reports (or Form 10-Q 
quarterly reports, as appropriate) filed with the U.S. Securities and 
Exchange Commission for the entire period covered by the petition;
    (6) Information concerning its major customers and their purchases 
(or its bids, if there are no major customers); and
    (7) Such other information as EDA considers material.
    (c) EDA shall determine whether the petition has been properly 
prepared and can be accepted. Promptly thereafter, EDA shall notify the 
petitioner that the petition has been accepted or advise the TAAC that 
the petition has not been accepted, but may be resubmitted at any time 
without prejudice when the specified deficiencies have been corrected. 
Any resubmission will be treated as a new petition.
    (d) EDA will publish a notice of acceptance of a petition in the 
Federal Register.
    (e) EDA will initiate an investigation to determine whether the 
petitioner meets the requirements set forth in section 251(c) of the 
Trade Act and Sec.  315.7.
    (f) A petitioner may withdraw a petition for certification if EDA 
receives a request for withdrawal before it makes a certification 
determination or denial. A Firm may submit a new petition at any time 
thereafter in accordance with the requirements of this section and 
Sec.  315.7.
    (g) Following acceptance of a petition, EDA will:
    (1) Make a determination based on the Record as soon as possible 
after the petitioning Firm or TAAC has submitted all material. In no 
event may the determination period exceed sixty (60) days from the date 
on which EDA accepted the petition; and
    (2) Either certify the petitioner as eligible to apply for 
Adjustment Assistance or deny the petition. In either event, EDA shall 
promptly give written notice of action to the petitioner. Any written 
notice to the petitioner or any parties as specified in Sec.  315.10(d) 
of a denial of a petition shall specify the reason(s) for the denial. A 
petitioner shall not be entitled to resubmit a petition within one (1) 
year from the date of denial, provided, EDA may waive the one-year (1) 
limitation for good cause.


Sec.  315.9  Hearings.

    EDA will hold a public hearing on an accepted petition if the 
petitioner, or any person, organization, or group found by EDA to have 
a Substantial Interest in the proceedings, submits a request for a 
hearing no later than ten (10) days after the date of publication of 
the Notice of Acceptance in the Federal Register, under the following 
procedures:
    (a) The petitioner and other interested Persons shall have an 
opportunity to be present, to produce evidence and to be heard;
    (b) A request for public hearing must be delivered by hand or by 
registered mail to EDA. A request by a Person other than the petitioner 
shall contain:
    (1) The name, address and telephone number of the Person requesting 
the hearing; and
    (2) A complete statement of the relationship of the Person 
requesting the hearing to the petitioner and the subject matter of the 
petition, and a statement of the nature of its interest in the 
proceedings.
    (c) If EDA determines that the requesting party does not have a 
Substantial Interest in the proceedings, a written notice of denial 
shall be sent to the requesting party. The notice shall specify the 
reasons for the denial;
    (d) EDA shall publish a notice of a public hearing in the Federal 
Register, containing the subject matter, name of petitioner, and date, 
time and place of the hearing; and
    (e) EDA shall appoint a presiding officer for the hearing who shall 
respond to all procedural questions.


Sec.  315.10  Loss of certification benefits.

    A Firm may fail to obtain benefits of certification, regardless of 
whether its certification is terminated, for any of the following 
reasons:
    (a) Failure to submit an acceptable Adjustment Proposal within two 
(2) years after date of certification. While approval of an Adjustment 
Proposal may occur after the expiration of such two-year (2) period, a 
Firm must submit an acceptable Adjustment Proposal before such 
expiration;
    (b) Failure to submit documentation necessary to start 
implementation or modify its request for Adjustment Assistance 
consistent with its Adjustment Proposal within six (6) months after 
approval of the Adjustment Proposal, where two (2) years have elapsed 
since the date of certification. If the Firm anticipates needing a 
longer period to submit documentation, it should indicate the longer 
period in its Adjustment Proposal. If the Firm is unable to submit its 
documentation within the allowed time, it should notify EDA in writing 
of the reasons for the delay and submit a new schedule. EDA has the 
discretion to accept or refuse a new schedule;
    (c) EDA has denied the Firm's request for Adjustment Assistance, 
the time period allowed for the submission of any documentation in 
support of such request has expired, and two (2) years have elapsed 
since the date of certification; or
    (d) Failure to diligently pursue an approved Adjustment Proposal 
where two (2) years have elapsed since the date of certification.


Sec.  315.11  Appeals, final determinations and termination of 
certification.

    (a) Any petitioner may appeal in writing to EDA from a denial of 
certification, provided that EDA receives the appeal by personal 
delivery or by registered mail within sixty (60) days from the date of 
notice of denial under Sec.  315.8(g). The appeal must state the 
grounds on which the appeal is based, including a concise statement of 
the supporting facts and applicable law. The decision of EDA on the 
appeal shall be the final determination within the Department. In the 
absence of an appeal by the petitioner under this paragraph, the 
determination under Sec.  315.8(g) shall be final.
    (b) A Firm, its representative or any other interested domestic 
party aggrieved by a final determination under paragraph (a) of this 
section may, within sixty (60) days after notice of such determination, 
begin a civil action in the United States Court of International Trade 
for review of such determination, in accordance with section 284 of the 
Trade Act.
    (c) Whenever EDA determines that a Certified Firm no longer 
requires Adjustment Assistance or for other good cause, EDA will 
terminate the certification and promptly publish notice of such 
termination in the Federal Register. The termination will take effect 
on the date specified in the published notice.

[[Page 56705]]

    (d) EDA shall immediately notify the petitioner and shall state the 
reasons for any termination.

Subpart C--Protective Provisions


Sec.  315.12  Recordkeeping.

    Each TAAC shall keep records that fully disclose the amount and 
disposition of Trade Adjustment Assistance program funds so as to 
facilitate an effective audit.


Sec.  315.13  Audit and examination.

    EDA and the Comptroller General of the United States shall have 
access for the purpose of audit and examination to any books, 
documents, papers, and records of a Firm, TAAC or other recipient of 
Adjustment Assistance pertaining to the award of Adjustment Assistance.


Sec.  315.14  Certifications.

    EDA will provide no Adjustment Assistance to any Firm unless the 
owners, partners, members, directors or officers thereof certify:
    (a) The names of any attorneys, agents, and other Persons engaged 
by or on behalf of the Firm for the purpose of expediting applications 
for such Adjustment Assistance; and
    (b) The fees paid or to be paid to any such Person.


Sec.  315.15  Conflicts of interest.

    EDA will provide no Adjustment Assistance to any Firm under this 
part unless the owners, partners, or officers execute an agreement 
binding them and the Firm for a period of two (2) years after such 
Adjustment Assistance is provided, to refrain from employing, tendering 
any office or employment to, or retaining for professional services any 
Person who, on the date such assistance or any part thereof was 
provided, or within one (1) year prior thereto, shall have served as an 
officer, attorney, agent, or employee occupying a position or engaging 
in activities which involved discretion with respect to the provision 
of such Adjustment Assistance.

Subpart D--Adjustment Proposals


Sec.  315.16  Adjustment Proposal Requirements.

    EDA evaluates Adjustment Proposals based on the following:
    (a) EDA must receive the Adjustment Proposal within two (2) years 
after the date of the certification of the Firm;
    (b) The Adjustment Proposal must include a description of any 
Adjustment Assistance requested to implement such proposal, including 
financial and other supporting documentation as EDA determines is 
necessary, based upon either:
    (1) An analysis of the Firm's problems, strengths and weaknesses 
and an assessment of its prospects for recovery; or
    (2) If EDA so determines, other available information;
    (c) The Adjustment Proposal must:
    (1) Be reasonably calculated to contribute materially to the 
economic adjustment of the Firm (i.e., that such proposal will 
constructively assist the Firm to establish a competitive position in 
the same or a different industry);
    (2) Give adequate consideration to the interests of a sufficient 
number of separated workers of the Firm, by providing, for example, 
that the Firm will:
    (i) Give a rehiring preference to such workers;
    (ii) Make efforts to find new work for a number of such workers; 
and
    (iii) Assist such workers in obtaining benefits under available 
programs; and
    (3) Demonstrate that the Firm will make all reasonable efforts to 
use its own resources for its recovery, though under certain 
circumstances, resources of related Firms or major stockholders will 
also be considered; and
    (d) The Adjustment Assistance identified in the Adjustment Proposal 
must consist of specialized consulting services designed to assist the 
Firm in becoming more competitive in the global marketplace. For this 
purpose, Adjustment Assistance generally consists of knowledge-based 
services such as market penetration studies, customized business 
improvements, and designs for new products. Adjustment Assistance does 
not include expenditures for capital improvements or for the purchase 
of business machinery or supplies.

Subpart E--Assistance to Industries


Sec.  315.17  Assistance to Firms in import-impacted industries.

    (a) Whenever the International Trade Commission makes an 
affirmative finding under section 202(B) of the Trade Act that 
increased imports are a substantial cause of serious injury or threat 
thereof with respect to an industry, EDA shall provide to the Firms in 
such industry assistance in the preparation and processing of petitions 
and applications for benefits under programs which may facilitate the 
orderly adjustment to import competition of such Firms.
    (b) EDA may provide Adjustment Assistance, on such terms and 
conditions as EDA deems appropriate, for the establishment of industry-
wide programs for new product development, new process development, 
export development or other uses consistent with the purposes of the 
Trade Act and this part.
    (c) Expenditures for Adjustment Assistance under this section may 
be up to $10,000,000 annually per industry, subject to availability of 
funds, and shall be made under such terms and conditions as EDA deems 
appropriate.

    Dated: September 19, 2006.
Benjamin Erulkar,
Deputy Assistant Secretary and Chief Operating Officer, Economic 
Development Administration.
[FR Doc. 06-8035 Filed 9-26-06; 8:45 am]
BILLING CODE 3510-24-P